Senior Home Buyers Are Fuelling the Market: CMHC

Senior Home Buyers

In addition to providing mortgage insurance for homeowners with less than 20 per cent for a down payment, one of the Canada Mortgage and Housing Corporation’s (CHMC) roles is to monitor and analyze the country’s housing stock. The federal agency recently released two reports, the 12th annual 2014 Canadian Housing Observer and the House Price Analysis and Assessment. Here’s a closer look at some of the key findings.

Senior Spenders Leading Growth

While much attention is paid to the first-time homebuyers market (including on this blog!), it turns out that the baby boomers still lead the way in housing in Canada. According to the CMHC, “Because the probability of owning a home rises as people get older…population aging helps account for the virtually uninterrupted increase in the homeownership rate in Canada over the past four decades.” In fact, the 60- to 64-year-old age bracket – the oldest of the boomers – had the highest ratio of homeownership in the period between 2006 and 2001.

Similarly, while most of us tend to think of young first-time buyers as the drivers behind the country’s condo boom, seniors account for nearly one-third (29 percent) of all owner-occupied condo-dwelling households.

Pursuing The Canadian Dream

Immigrants currently account for more than 20 per cent of Canada’s population, an important factor in housing needs as the CHMC points out: “Immigration boosts demand for both rental housing and homeownership.” And while immigrants often start off in rental units, the majority move into homeownership within a few years of their arrival.

A recent CIBC World Markets reports, Foundations of Canadian Housing Better Than Advertised, echoed this in highlighting the positive influence of Canada’s immigrant population on housing. Immigrants account for nearly 70 per cent of recent population growth, and half of all new immigrants are in the “prime-aged, 25 to 44-year-old cohort” that’s in their peak earning years and eager to establish roots with a home of their own.

The Challenges of Seeking Shelter

While Canada has long been seen as a land of opportunity for immigrant families, many of those already living here are struggling to meet their needs. The CMHC uses the phrase “core housing need” to refer to households that require major repairs, do not have a sufficient number of bedrooms for the occupants, and cost 30% per cent or more of pre-tax income. In 2011, 1.6 million households were considered to be in core housing need, up from 1.5 million in 2001. With the national average for core housing need at 12.5 per cent, by far the highest rate of need is in Nunavut – at 39.3 per cent – where the harsh climate makes any need that much more difficult. Relatively balmy PEI, on the other hand, had the lowest rate, slightly below the national average at 9.2 per cent. Perhaps not surprisingly, the country’s most populous cities, Vancouver and Toronto, both exceeded the national average at 17.7% per cent and 16.9 per cent respectively.

No Construction Slowdown in Sight

The rapid growth of condo towers in city centres (at one point Toronto reportedly had the highest number of cranes working on highrise projects of any city in the world) and continuing sprawl of housing developments in the suburbs has lead many to speculate that we’re in a period of overbuilding.

But the CMHC’s analysts don’t see it that way. “At the national level, other than a modest amount of overvaluation, we do not detect the presence of other risk factors such as overheating, price acceleration, and overbuilding,” said Bob Dugan, CMHC’s chief economist, in a release about the House Price Analysis and Assessment.

Montreal, Quebec City, and Toronto were the only three major metropolitan areas were the CMHC felt there was even a moderate risk of overvaluation. For each of those cities, the fact that housing price growth has exceeded personal income growth is the main cause for concern that pricing may be somewhat bubbly.

Also read: Will Canada’s Condo Fears Come True?>

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Mortgage News / Mortgages

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