“Demographic forces will be as supportive to real estate markets in the coming decade as they were in the past decade,” CIBC economist Benjamin Tal says in a report. …
“The growth in the number of Canadians in the age group 25-34, which accounts for the vast majority of first-time buyers, is projected to be much stronger. In other words, the group that is most likely to buy a house will grow faster in the coming decade,” Tal says. …
“The housing correction in the 1990s came with a softening in demographically-based housing demand, CIBC says, which dropped from an average annual rate of more than 2 percent in the late-1980s to 0.2 percent during the 1990s.” …
“Assuming that any upcoming adjustment in housing market activity will occur in a non-recessionary environment, demand for housing in the coming decade should be more than four times stronger than it was during the dreary market of the 1990s,” Tal says.
An increase in immigration is also expected to boost the housing market, according to CIBC, as home ownership rates for immigrants ten years after they have arrived are higher than among those born in Canada.
“So, while housing market activity is projected to soften in the near-term, the good news is that any adjustment will not be aggravated by negative demographic forces,” Tal says. “In fact, at least for the next decade, demographic forces will be strong enough to mitigate the damage and probably shorten the duration of the upcoming market adjustment.”
– from ‘Housing crash fears overblown: CIBC’, bnn.ca, 23 Aug 2012
Real demand for housing supports fundamental-derived prices, not speculative-derived prices.
Perhaps the weakness in the Canadian market in the 90’s came from waning demographic demand.
The weakness now commencing is the result of a cresting speculative mania. Fundamental-derived price supports (based on rent yields or local incomes) only come in at prices far below current market prices. A slight increase in demand due to demographic factors will not substantially change the reconciliation that is going to be occurring.