From now until 2036, Canada's population growth is going to slow down, and as Canadians age, fewer new households will be formed. The country's housing industry is counting on immigrants to pick up the slack.

A report in the Canadian Housing Observer by Canada Mortgage and Housing Corp. (CMHC) summarizes the results from a national household growth simulation, coming up with several different scenarios of where household growth could be headed. It shows that from 2007 to 2036, immigration could account for nearly all of the projected growth in the population and for about 2.6 million additional households out of a total household growth of 4.6 million.

"Net international migration accounted for close to two-thirds of population growth in 2006. The ongoing shift in Canada's age structure, coupled with the widely held view that this demographic transition could spur a shortage of skilled workers, will likely ensure that immigration remains the biggest source of population growth over the coming decades," says the report.

It says that although household growth is an important factor in housing demand, they are not the same thing. Household growth does not take into account changes in the number of vacant dwellings, demand for second homes, and older buildings that are replaced or converted to or from residential uses. However, household growth is still the largest component of the demand for housing.

The Baby Boom generation dominated during the 1970s and 1980s, when both household formation and housing demand soared. More recently, CMHC says that aided by rising immigration, the average yearly growth in the adult population (14 plus) rose from 1.2 per cent from 1991 to 1996 to 1.4 per cent from 2001 to 2006. "The present projections suggest that, if not already behind us, the days of adult population growth rates in excess of one per cent are numbered," says the report. The average annual adult population growth rate is projected to fall steadily, to between 0.6 and 0.7 by 2031 to 2036, according to the CMHC projections. "Not surprisingly, population aging and continued low fertility are the main sources of this projected decline," says the report.

This means fewer households will be formed. CMHC says non-family households (one person living alone or two or more people sharing a dwelling who are not considered a family) will grow more rapidly than family households. The non-family share of total households is projected to rise to between 33 per cent and 34 per cent of all households.

The growth of homeowner households averaged 170,000 annually from 1996 to 2006, again because of the impact of the Baby Boomers. "Key factors behind the large increases in age-specific ownership rates observed during the decade were strong employment growth and low interest rates. Since the strong gains in age-specific ownership rates are not expected to continue indefinitely, the decade of 1996 to 2006 likely represents a peak in the growth of owner households," says the report.

More than 70 per cent of homeowners live in single-detached homes, and about 70 per cent of renters live in apartments. During the last 20 years, condominiums have had a big impact on housing, however. In 1986, an estimated 82 per cent of owner-occupied dwellings were single detached, but by 2006 the number was down to 74 per cent.

The CMHC report says the increased popularity of condos "reflects a number of related factors, such as a strong income and employment growth coupled with improved lending conditions, which made homeownership more attainable for a wider range of households. Other likely factors include the growing number of non-family households, and the decline in the average household size that accompanies population aging."

It says that occupancy rates for apartments are highest for the youngest households. "These rates tend to decline as households age, bottoming out when people reach their forties, and then rising once people age into their fifties and beyond. The expected shift in the population's age structure is therefore expected to exert some upward pressure on household formation associated with apartment dwellings over the first decade of the projection period."

However, the projections say that single-detached homes will continue to account for more than half of all privately occupied households.

About 68.3 per cent of households were homeowners in 2006, says CMHC. That number could rise to 69.8 per cent by 2011 and to 73.5 per cent by 2036 under the simulation's most optimistic scenario.

Contributed by Jim Adair
for my Realty Times Newsletter
www.realtytimes.com