The future of Canada’s housing market is immigrant population and young buyers in their 20s and 30s, who will be instrumental in the revival of the market, a report by CIBC stated.
Instability in the housing market has many predicting a sharp downturn but experts say is “highly exaggerated and very premature.”
“It turns out fears of a long and sharp down turn in the housing market are highly exaggerated and very premature," Benjamin Tal, Deputy Chief Economist at CIBC said in a statement. "In fact, demographic forces will be supportive to real estate markets in the coming decade."
It's expected that those between the ages of 25 and 34 will constitute prime home-buying demographic, in spite of a majority of Baby Boomers downsizing to fund their retirement. Recent research shows that 18 percent of that group purchases a home in any given year.
"In other words, the group that is most likely to buy a house will grow faster in the coming decade," Tal wrote.
In an interview, Tal told the Times Colonist that though many youngsters might putting off buying a house due to student debt, their wealthy parents will help in the investment. "Many of those young people - [if] they're lucky - they have wealthy parents.
"This is actually the first generation that the parents are better off than the kids and those parents will write a nice cheque. The student debt level is not significant enough to really kill the housing market," the chief economist told the paper.
He also predicted that these youngsters will be "extremely dynamic" in terms of employment, which will help them purchase a house.
Immigration and housing
Also, besides youngsters, immigration will also be a key factor in strengthening the housing market, Tal said, adding that most of the growth in population is now due to immigration. Changes in immigration policies are further expected to bring more people to Canada.
"What's more, there is significant jump in the home ownership rate among immigrants as they pass the three-year mark. In fact, after 10 years in Canada the propensity among immigrants to own a house is higher than among native born Canadians," Tal said.
On the whole, Tal says that the demographic forces will be strong enough to mitigate any correction in the market.
