It is anticipated that demographics will have a profound impact on Canada’s housing market within the coming years, leading to less housing turnover, as well as fewer sales and listings, according to a new report prepared by Scotiabank Economics.
However, that is not necessarily a bad thing.
“Contrary to some dire predictions, population aging won’t fuel a demographically induced sell-off in Canadian real estate,” Scotiabank economist Adrienne Warren told a conference on world housing trends today.
“Today’s seniors are healthier, wealthier and living longer than previous generations. They are more likely to have their own home, and to live in their homes longer. “Many will not need to tap into their principal home to finance retirement,” she said.
Home ownership rates are likely to decline as the massive wave of baby boomers, the first of whom are now in their late 60s, start to hit age 75. However, even at that later stage of life, near seventy per cent of Canadians still tend to own and live in their own homes, said Warren.
Moreover, they are typically too comfortable and attached to their communities, to move, Warren says in her report.
Over a five-year period, just twenty per cent of homeowners over sixty-five tend to move, about half the rate of the remainder of the population. Once they do, it tends to be into retirement communities or rental accommodation, which bodes well for rental demand down the road, she noted.
Housing demand is also likely to be tempered within the next few decades, she said, by slowing population growth.
Housing, which most definitely slowed, however, did not crash due to the global financial crisis, actually helped sustain Canada’s economy through much of 2010 to 2012.
While the United States is outpacing the world in recovering from the devastating downturn of its housing market, “the long-anticipated delay in Canadian housing activity is well underway” however unlikely to lead to drastic dips in prices.
Warren said immigration, which adds some 250,000-300,000 people to Canada’s population each year, will increasingly be the more dominant source of new household formation.
Whereas immigrants usually rent on arrival in Canada, they also seek home ownership after approximately five years, and their rates of home ownership approach the seventy percent rate of our native Canadians after ten years.
Immigration is most likely to support house prices in larger cities, Warren said. That should facilitate a floor beneath the markets in Toronto and Vancouver, each having had the hottest markets before the slowdown hit.
Sales are down about ten per cent since last spring, housing starts have dropped from 220,000 to 180,000 year-over-year, first-time buyers and even investors are taking a breather, said Warren.
All of that is likely to continue with job growth expected to slow, she added.