Brokers can breathe a sigh of relief, according to a top CIBC economist, suggesting the anticipated housing decline will not be as sharp or as long as earlier projected because of immigration.
“It turns out fears of a long and sharp downturn in the housing market, are highly exaggerated and very premature,” said Benjamin Tal, deputy chief economist at CIBC. “In fact demographic forces will be supportive to real estate markets in the coming decade.”
Tal predicts immigration, which is responsible for most of the population growth, will be a major force impacting housing demand.
“What’s more, there is significant jump in the home ownership rate among immigrants as they pass the three-year mark,” said Tal. “In fact, after 10 years in Canada, the propensity among immigrants to own a house is higher than among native Canadians.”
While there will be a decline in the number of Canadians under the age of 25 and those between 45 and 54, those age groups account for a relatively small portion of home buyers, Tal writes in his latest Consumer Watch report.
By contrast, the number of Canadians between the ages of 25 and 35 – the age group that makes up the vast majority of first-time home buyers – will continue to rise, the report said.
“From a housing market perspective, what counts is not only the change in population of a given age group, but more importantly, the level of housing market activity among these groups,” said Tal. “In other words, the group that is most likely to buy a house will grow faster in the coming decade.”