Canada Housing Series: Introduction & Overview
Our Canada Housing Series reports present housing projections for Canada and its major metropolitan markets for the next three decades. The results of these projections differ significantly from the apocalyptic scenario popularized at the turn of the century. During the late 1990s and early 2000s, predictions were made that a crash in Canada’s housing market – “housing market meltdown” – was imminent due solely to anticipated shifts in our national demography. The reasoning behind this scenario was that because Canada’s post war baby boom generation (born 1946 to 1965) was of a bigger size than the baby bust generation (born 1966 to 1985) that followed it, the housing market would crumble, as the number of people exiting the housing market (the boomers) would exceed the number of new entrants (the busters) and housing supply would outweigh demand. This crashing and crumbling was expected to begin around 2005 when the leading edge of the boom generation would turn 60 and a growing number of aging Canadian residents would be exiting the housing market. This was also a period when the first of the busters would be in their early-30s, in the midst of the household and family formation stages of the lifecycle. Again, the argument was that there would not be enough busters to replace the boomers.
Rather than crash and crumble, the Canadian housing market has seen one its most buoyant periods in the last decade and a half. Since 2000, the number of occupied homes in Canada has grown by an average of 185,000 units per year (more than 2.2 million homes in total), which is eight percent above the previous decade’s average additions of 172,000 units. Housing starts have averaged 200,000 per year, which is 37 percent above the previous decade’s 146,000 annual starts. And housing prices have risen by an average annual rate of seven percent, well above the 2.4 percent annual increases of the previous decade.
The reasons the apocalyptic assumptions were wrong were that they both over-simplified the forces that shape housing demand – there is more at work than just demographics – and they got the demographics wrong. Certainly demographics are at the core of housing demand, and a fundamental principle of demographics is that people do not leave the housing market when they turn 60, or 70, and increasingly, given the substantial increase in life expectancy we have enjoyed over the past century, not even when they turn 80. Thus the fact that the buster generation was smaller than the boomer generation was not relevant: while the busters (now aged 39 to 58) have fully entered the housing markets, the boomers (now aged 59 to 68) have not yet left it. The baby boom has not yet had to be replaced in the housing market, and so additional housing has had to be built for the busters. Additionally, while the number of births in Canada in the buster era was less than the number in the boomer era, subsequent net migration has increased the number of people in the buster generation to the point that the busters, not the boomers, are now the largest single cohort in the national population. Contrary to the general narrative, there are now more busters than boomers in Canada.
While these demographic factors establish the core of demand in housing markets, other factors also play a significant role. Behavioural lifecycle patterns of housing occupancy establish how demographics are converted to housing demand; changing lives and life styles have altered the rate and pattern of housing occupancy in both the younger and older populations. Housing markets also have an economic context, which takes into consideration employment, household income, and the ability of households to pay the mortgage or rent. And there is the financial context, with changes in underwriting criteria, investment taxation, and interest rates all shaping demand. Having said this, while the various financial and economic factors do matter, their impact is more on the timing of housing-related decisions that are made by households, with demographics and lifecycle patterns determining its long run levels.
Our full report (which can be accessed as a PDF below) begins by outlining the national demographic context for past and future housing occupancy demand. As part of the demographic assessment, trends in births, deaths, and net immigration are considered, both back to 1971 and forward to 2041. The report then focuses on housing, presenting current and future lifecycle patterns of housing occupancy, described by both the dwelling structural type and by tenure, and how these patterns are projected to interact with Canada’s changing demographic landscape over the coming decades.
Having outlined the principles and processes of changing housing occupancy demand at the national level, the report then acknowledges that real estate markets are regional, each being shaped by its specific demographic, economic and physical landscape. Thus, the final component of this research comprises demographic and housing projections for major Census Metropolitan Areas (CMAs) across Canada, with each describing how each housing market is projected to change as a result of trends in its underlying demography and its particular lifecycle pattern of household occupancy. These regional profiles can be accessed at either of the two PDF links below, with the summary report containing only a brief analysis for Canada as a whole (a more in-depth consideration of national demographic and housing-related trends is only available as part of the full report; see below). Alternatively, you can access html versions of the regional and national profiles by clicking the links located on the left-hand side of this page, along with a summary of David Baxter's recent presentation at the Toronto Real Estate Forum on population and housing in Canada.
Three main data sources were used in compiling the projections. The source for National and CMA demographic data was Statistics Canada’s Annual Demographic Estimates, which provides data on the annual number of births, deaths and migration by age in sex. Housing data were taken from Statistics Canada’s Census and new National Household Survey (NHS). These two surveys provide the link between the demography and housing occupancy on an age, structure and tenure type basis. All demographic and housing projections were compiled from Urban Futures models.
Click here to download a PDF version of a summary for Canada and selected CMAs.
Click here to download a PDF version of our full report.
© 2014 Urban Futures