A January 10, 2020 Financial Post Article written by Pamela Heaven, discusses how a shift in Canadian demographics will create big change in the Housing Market:
“Housing prices are back on the Bank of Canada’s radar, Governor Stephen Poloz revealed in a fireside chat in Vancouver yesterday. “Should this housing rebound continue, we will be watching for signs of extrapolative expectations returning to certain major housing markets — in other words, froth.”
BMO senior economist Sal Guatieri points out that while housing prices haven’t returned to the 30% to 40% pace of early 2017, “they are clearly gaining steam,” with Toronto area home prices up 7.3% in December from the year before. “While the Bank may not be tempted to raise rates to skim off any ensuing froth, it will be disinclined to fan the flames,” Guatieri said.
Meanwhile, a solution, or relief anyway, for high housing prices may be found in Canada’s “ticking demographic time bomb,” suggests a recent report by RBC economics.
Canadian society is headed for massive change over the next decade as baby boomers age. RBC estimates that by the end of this coming decade, almost one in four Canadians will be seniors, up from 17% now. This will increase financial burdens on working-age Canadians and government, but may also help address the challenges in the housing market.
RBC expects baby boomers to “release” half a million homes over the next decade. Much of this “long awaited supply for new generations of buyers,” will be family homes near urban cores. These homes won’t go cheap but the turnover offers opportunities to transform and expand the housing supply, RBC says. A lot formerly occupied by one house could be turned into multiple units, for example. To make the most of this transition however, governments need to do more to modernize restrictive housing supply policies, the report says.”
Source: Financial Post – January 10, 2020