While many economists are predicting a 10 – 15 per cent drop in housing prices over the next several years, Benjamin Tal at CIBC says that it’s the demographics of our country that’s going to keep our housing market afloat.
Mr. Tal isn’t the first to bring up demographics in our country in regards to our housing market; he just has a different view of them. This is because when it comes to the demographics in Canada, most experts are worried that it’s the Baby Boomers that are going to sink us. If you take this line of thought only at surface value, it has some merit. After all, there’s a huge amount of Boomers, some already in their retirement years, and many of those Boomers will want to unload their large family homes that they’ve had for decades. This would put a huge amount of inventory onto the marketplace at one time. And that would be at a time (in the next several years when our housing market’s supposed to drop slightly) when we could least afford it.
But if you look at the chart below, it’s easy to see how unfounded these fears might be; simply because there are actually very few Boomers when compared with the rest of our population. And it’s this much larger demographic population, says Mr. Tal, that won’t only offset the rise of Boomer inventory on the market, but will also help keep our housing market in the healthy place it’s been for the past several years.
Mr. Tal doesn’t disagree that the amount of Boomers is going to increase over the next decade. But he also doesn’t think this will be the only group to grow. The 25 – 44 age group will also grow, and almost at an equal clip to the Boomers. It’s this group, Tal says, that accounts for 18 per cent of the homebuying in Canada every year.
“In other words,” said Tal in his report, “the group that is most likely to buy a house will grow faster in the coming decade.”
Tal also says that another group that’s bound to grow, and therefore support our housing market, is that of new immigrants. Even though immigrants to Canada often have a hard time finding Calgary or Ottawa mortgages when they first arrive due to new mortgage rules requiring the verification of income, Tal says that they’re also more aggressive in their pursuit of home ownership than Canadians who are born here are.
“After ten years in Canada the propensity among immigrants to own a house is higher than among native-born Canadians,” Tal said in his report.
But none of this means that Tal disagrees with the forecast that the Canadian housing market is going to cool down within the next few years, at least slightly.
“While housing market activity is projected to soften in the near-term, the good news is that any adjustment will not be aggravated by negative demographic forces,” Tal writes. “At least for the next decade, demographic forces will be strong enough to mitigate the damage and probably shorten the duration of the upcoming market adjustment.”
