Even as housing markets across Canada see a reduction of sales, market watchers say it's vital to keep an eye on future housing supply..New household formation is the key driver determining how much new housing is required and, fortunately, the number of new households can be accurately determined..One indicator is new households created by existing households — young people leaving the parental nest to chase job opportunities, attend schools, get married and other reasons..StatsCan reports household size, most recently averaging 2.6 people per home, is decreasing at a time when the population is increasing, creating the need for more housing..New arrivals to the country drive the need as well, with the Canadian government setting its sights on welcoming an estimated 1.3 million immigrants between now and 2024..“If the rate of immigration and current changes in household formation behaviour persists, we would likely not have a housing crash over the mid- to long-term,” says Kate Choi, associate professor of sociology at Western University and director of the Centre for Research on Social Inequality..“A greater number of households overall means those households will need more housing. So that, in turn, will exert an upward pressure on housing prices.”.Aled ab Iorwerth, of the Canada Mortgage and Housing Corporation, says policy makers and housing industry executives need to plan for the pending increase in demand..“Immigration and smaller household sizes are all pointing to greater housing demand over the long term,” he says. “We need the housing supply to meet that demand.”.Specifically, a stronger focus on multi-unit complexes could benefit markets such as Toronto and Vancouver, which attract most immigrants to Canada..“The need is to try and redevelop these areas and bring in greater density to accommodate younger households,” ab Iorwerth said..A Royal LePage survey found 51% of millennials plan to buy a home within five years. This includes a first home, a move-in property or a secondary residence..“That means more than four million young Canadians will be looking to make a purchase between now and 2027,” says Phil Soper, president and CEO of Royal LePage. “The need for a significant increase in the supply of housing in Canada has not gone away.”.“Employment and migration trends have intersected with real estate market trends over the last two years. The irreversible impact that the pandemic has had on our workforce and the manner in which employees do their jobs sparked a shift in the mentality of many Canadians, especially young professionals, who are reprioritizing their lives and their plans for the future.”.“Strong real estate demand is no longer concentrated in the major centres, but has expanded to many suburbs and exurbs where homebuyers can purchase larger, more affordable properties, as the tolerance for commuting wanes and the desire to have more flexibility in the hours and location one works increases.”.The current housing slowdown is rightfully raising concerns, however, Soper says markets will eventually level out, drawing buyers back into the market..“While we are seeing a slowdown in market activity, as prospective buyers temporarily put their home purchase plans on pause while they seek to understand the full impact of rising interest rates and inflation on their bottom line, we expect that activity will rise again, although not at the same rate we saw throughout 2021 and early 2022,” he says..“The return of these sidelined purchase intenders, a growing population, largely from increased immigration levels, together with household formation changes — individual households made up of parents and their millennial children evolving into two, three or four households — will require more available housing stock to ensure a balanced market and to help bring affordability back within reach of many Canadians.”.“Policy makers should take note that between millennial demand, immigration and the growing pipeline of those who could not transact over the last two years, more supply is required. We could see another surge in price appreciation, following short-term economic softening, when these sidelined purchase intenders transact.”
Even as housing markets across Canada see a reduction of sales, market watchers say it's vital to keep an eye on future housing supply..New household formation is the key driver determining how much new housing is required and, fortunately, the number of new households can be accurately determined..One indicator is new households created by existing households — young people leaving the parental nest to chase job opportunities, attend schools, get married and other reasons..StatsCan reports household size, most recently averaging 2.6 people per home, is decreasing at a time when the population is increasing, creating the need for more housing..New arrivals to the country drive the need as well, with the Canadian government setting its sights on welcoming an estimated 1.3 million immigrants between now and 2024..“If the rate of immigration and current changes in household formation behaviour persists, we would likely not have a housing crash over the mid- to long-term,” says Kate Choi, associate professor of sociology at Western University and director of the Centre for Research on Social Inequality..“A greater number of households overall means those households will need more housing. So that, in turn, will exert an upward pressure on housing prices.”.Aled ab Iorwerth, of the Canada Mortgage and Housing Corporation, says policy makers and housing industry executives need to plan for the pending increase in demand..“Immigration and smaller household sizes are all pointing to greater housing demand over the long term,” he says. “We need the housing supply to meet that demand.”.Specifically, a stronger focus on multi-unit complexes could benefit markets such as Toronto and Vancouver, which attract most immigrants to Canada..“The need is to try and redevelop these areas and bring in greater density to accommodate younger households,” ab Iorwerth said..A Royal LePage survey found 51% of millennials plan to buy a home within five years. This includes a first home, a move-in property or a secondary residence..“That means more than four million young Canadians will be looking to make a purchase between now and 2027,” says Phil Soper, president and CEO of Royal LePage. “The need for a significant increase in the supply of housing in Canada has not gone away.”.“Employment and migration trends have intersected with real estate market trends over the last two years. The irreversible impact that the pandemic has had on our workforce and the manner in which employees do their jobs sparked a shift in the mentality of many Canadians, especially young professionals, who are reprioritizing their lives and their plans for the future.”.“Strong real estate demand is no longer concentrated in the major centres, but has expanded to many suburbs and exurbs where homebuyers can purchase larger, more affordable properties, as the tolerance for commuting wanes and the desire to have more flexibility in the hours and location one works increases.”.The current housing slowdown is rightfully raising concerns, however, Soper says markets will eventually level out, drawing buyers back into the market..“While we are seeing a slowdown in market activity, as prospective buyers temporarily put their home purchase plans on pause while they seek to understand the full impact of rising interest rates and inflation on their bottom line, we expect that activity will rise again, although not at the same rate we saw throughout 2021 and early 2022,” he says..“The return of these sidelined purchase intenders, a growing population, largely from increased immigration levels, together with household formation changes — individual households made up of parents and their millennial children evolving into two, three or four households — will require more available housing stock to ensure a balanced market and to help bring affordability back within reach of many Canadians.”.“Policy makers should take note that between millennial demand, immigration and the growing pipeline of those who could not transact over the last two years, more supply is required. We could see another surge in price appreciation, following short-term economic softening, when these sidelined purchase intenders transact.”