What Canada’s Massive Population Growth Means for The Housing Market
This year Canada has experienced the largest population growth since Confederation1. What caused this record-breaking spike after 153 years? Immigration. From July 1, 2018 to July 1, 2019, Canada’s population increased by 531,497 people2 – that translates to adding just over one person every minute of that year. Over 80% of this growth is driven by the arrival of immigrants and non-permanent residents.
Overall, immigration is deemed as a positive thing for Canada, especially due to our aging population. Analysts are saying that Canada needs more immigration to offset the increasing aging population and our decreasing birth rate. To maintain and fund our social programs, such as universal health care, we need more people in the working adult population paying taxes to carry the load of our maturing population over the next several decades.
Baby boomers account for the majority of seniors in Canada. As this group of sixty- and seventy-year-olds move further into their twilight years, more money into health care, helping seniors age in place, and infrastructure will be needed. The Canadian Government’s Action for Seniors report3 sheds some light on how Canada will deal with our shifting demographics.
Canada’s rapid population increase doesn’t appear to be slowing down, with nearly 22% of the Great White North’s population being born outside the country. In terms of replacing the aging population with young, skilled immigrant workers, it seems we are on the right path to offsetting this inevitable shift. Plus, with native-born Canadians living longer than ever before, we need the population to support our elders, with some living to over 100 years old. Canada is currently home to over 10,000 centenarians4.
But what does this population increase mean for the housing market in the short term and long term? How does rapid increases in the adult population impact supply, demand, and prices? Randall Weese, Purplebricks’ Broker of Record, shares his thoughts.
This massive population increase of 2019 impacts the housing market greatly. Newcomers to Canada, need a place to live, which of course puts pressure on the housing market to provide supply. Conversely, we have seen a decrease in supply in many of Canada’s housing markets. What this means is there are more people looking to buy a home than there are people selling their home. This causes prices to increase because demand is greater.
Home sellers will be pleased with the increased property value, but what does this mean for home buyers? It means likely paying very close to or above asking price for a home, while having to put offers in quickly if interested in a certain home due to increased competition. The upsurge in demand in the market, especially in major cities, inflates prices and makes it harder for both Canadians and immigrants to buy a home.
As a result of fewer people being able to purchase a home, either due to low stock or the price being too high, the demand for rentals has increased as well. A healthy vacancy rate for a city is 3%, but many major Canadian cities are experiencing much less than that. Toronto’s vacancy rate has been on the decline for several years, with a 2.4% vacancy rate for 20185. Based on market reports throughout 2019, we expect the Canada Mortgage and Housing Corporation (CMHC) to report even more of a decline for this year for Ontario’s capital. In Vancouver the vacancy rate is less than one percent6, and Montreal will likely see a rate of less than 1.3% in 20207, the CMHC predicts. With demand for rental housing growing faster than the supply, we need affordable rental properties for Canadians – and lots of them.
“Affordable housing” is hard to find regardless if a person is looking to purchase or rent. With the demand being so high for renters, it seems to be driving up rent prices on properties that are ideal for landlords. The higher the rent, the more the landlord can pay for an income generating investment.” – Randall Weese, Purplebricks Canada, Licensed Broker of Record/Director Compliance & Brokerage Services
Canada has one of the highest migration rates8 in the world. This is unlikely to change in the near future, considering the agenda to increase immigration to offset the large aging population and low birth rate. Many newcomers choose Toronto, Vancouver or Montreal to call home. These major cities have higher than national average housing costs. In the long term, it is probable we will see more immigrants and Canadians moving out of the city centres to surrounding cities and towns. This migration is already evident and will likely intensify in the years to come.
Increased population requires more housing. And where will this housing need to go? Up! The need for condominiums and stacked townhomes will likely increase as land becomes a hotter commodity in large cities and its surrounding communities. More and more people want to live in the city centres, but there is only so much land in these areas. The only solution to fit more people in per square foot is to build upwards, not outwards. In previous years high rises were the norm only in large cities. Now? You can find high rises being built in small towns. A shining example of this is Grimsby, Ontario, a town of just over 10,000 people that has seen a massive increase in condominium buildings along its waterfront. It is expected this trend will continue in many less populated cities and towns.
We expect to see an increased demand for multi-generational homes. Canada’s seniors want to age in place, but many require in-home care to keep up with their lifestyle. Adult children can live with their aging parents to help them, while also living with less financial burden. With stricter mortgage regulations and home prices steadily increasing, multi-generational homes allow young Canadians and immigrants to enjoy home ownership with greater financial ease than doing it on their own. Whether homeowners will be renovating their existing homes to be multi-generational or if new home builders will seize the opportunity to tap into a growing market, multi-generational homes will be on the rise.
“There are many benefits to having a secondary unit in your home, both for financial and convenience reasons. Whether the young couple that is not established yet is living in a separate unit in their parents home trying to save up to buy their own home, or an established family has their aging parents in an in-law suite, there are clear benefits for both situations. These homes tend to fetch a premium on the market.” - Randall Weese, Purplebricks Canada, Licensed Broker of Record/Director Compliance & Brokerage Services
Like any national change, there can be positives and negatives that will impact current and future generations. While encouraging our senior population to age in place, a challenge for the country is to keep the housing market in a healthy ebb and flow of supply and demand. An emphasis on fostering housing prices that allow young Canadians and immigrants to enter the housing market will be vital for the country’s economic health. Is Canada up for the challenge? We think so.
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1 Canada needs a lot more people, and soon (Policy Options)
2 Canada's population estimates: Age and sex, July 1, 2019 (Statistics Canada)
3 Action for Seniors report (Government of Canada)
4 Canada today: There are more of us and we're getting older, statistics show (National Post)
5 National Vacancy Rate Down for Second Year (CMHC)
6 ‘Reasons to be optimistic’ about Metro Vancouver rental market: RBC (BIV)
7 Rental market is expected to get even more dire in Montreal (Montreal Gazette)
8 The World Factbook (CIA)