Part of the reason that there is an insufficient supply of housing in Canada is because there are simply more people wanting a home than there are ones available for them to buy, move into, and live there. Immigration is an important part of Canada and has always been that way considering we are very much a country of immigrants and in the big picture we’re better for it. But immigration does put strains on society, and particularly with regards to housing, healthcare, and infrastructure. New housing starts can’t keep up with the demand, and the demand is growing exponentially larger all the time.
We also know that the Canadian housing market is in a correction right now, and that while falling median prices for homes isn’t something that existing homeowners or real estate agents are going to want to hear of. But at the same time if you’re going to be fair and objective you’ll have to say it’s a very necessary correction given what has happened over the past 5 years and more. Even real estate agents will agree with that, and while a correction means houses are selling for less that certainly doesn’t mean that fewer of them are being sold.
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A prominent economist is saying that the Canadian housing market won’t have that outright crash due to steady demand from immigration as newcomers to Canada are helping to support the property market through its current downturn. The indication is that the flow of new permanent residents is already rebounding from lows seen during the pandemic and are on their way to record levels if Canada’s updated immigration targets are going to be met.
So yes, Canada is in the middle of a steep housing correction and while the cycle hasn’t played itself out in full yet, no one believes we’re going to see the type of prolonged spiral seen in the US during the 2008 financial crisis. And the primary reason for that is the demographic demand for housing in Canada is strong and becoming stronger all the time.
Let’s remember that the number of Canadian households is forecast to increase by 730,000 by 2024 as we add an average of 240,000 new households annually. Immigration is a fundamental part of the increase, and Canada is aiming to bring in a record 1.3M new permanent residents with 555,000 new households over the next 2 years or so. The country’s population is growing at a pace that is double the average one for an OECD country over the last 10 years.
Household Sizes Shrinking
The rapidly increasing population is combined with shrinking household sizes. Between 2016 and 2021 the average household size declined by 0.02 people, going along to an increase in total household numbers by 30,000 each year. And what that does is strengthen demand for housing and powerfully counteract sliding sales and prices to put a ‘floor’ under the correction. This will prevent median home prices from declining TOO much, and that has to be good news for homeowners.
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