Canadian housing prices set to double in 20 years: CIBC
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inevitably lead to a drop in home prices in the future, CIBC World
Markets says.
"Despite downward pressure from demographic forces, on average, we
expect house prices in Canada to double in the next 20 years," said
Benjamin Tal, a senior economist at the investment bank.
"Fears of a decline resulting from the downsizing and increased
liquidations of houses by seniors and the falling number of first-time
buyers are highly exaggerated," he said.
Tal's study noted that 20 years ago, some demographers were predicting
that real house prices in Canada and the U.S. would drop in the
following two decades as the baby boomers aged.
Instead, prices rose by an average of about three per cent annually
after inflation in Canada and four per cent in the U.S.
The CIBC World Markets study looked at demographic projections for
Canada's population, but said the country's demographic profile isn't
the whole story.
Yes, the number of people aged 45 to 54 is expected to drop by 2.5
million by 2026 as the baby boomers age. But this age group accounts
for only 12 per cent of the housing demand, it said.
Most home purchases take place when people are younger. CIBC says 68
per cent of all first-time home buying is done by people aged 25 to
44. That group is expected to decline only slightly in the coming two
decades.
CIBC also sees several other factors supporting long-term housing
demand and prices:
* Interest rates are expected to stay low.
* Immigration is expected to increase.
* New mortgage products will make home ownership more accessible.
The bottom line, according to the study, is that demographic changes
in the next 20 years will not be large enough to dramatically change
housing market conditions.
Assuming an average inflation rate of two per cent, the expectation is
that house prices will double by 2026.
"This increase, of course, will not be symmetrical - with large cities
seeing even larger increases in home valuations," Tal said.
The Canadian Real Estate Association reported earlier this week that
the average resale home price in 25 major markets across Canada was a
record $316,572 in March.
Info Source: http://www.cbc.ca
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