Impact of Demographic Changes on Canadian Housing Demand

Demographic changes significantly influence housing demand through factors such as population growth, immigration levels, and household formation rates. Increased immigration tends to raise housing demand by adding to the population and creating new households, while slower population growth or decline can reduce demand.

Key impacts include:

• Immigration levels: Higher immigration increases housing demand by adding new residents who need housing. For example, a recent immigration plan is projected to reduce the housing gap by increasing housing demand and stimulating completions, but the housing gap remains substantial, indicating strong ongoing demand. Conversely, lower immigration levels can reduce rental and homebuying demand, especially in major urban centres, leading to slower housing market activity.

• Population growth and household formation: Population growth drives demand for new housing units. If population growth slows or declines, housing demand may weaken, potentially easing affordability pressures. However, some forecasts suggest population growth may remain higher than expected, maintaining pressure on housing markets.

• Housing supply dynamics: Demographic changes interact with housing supply. Increased demand from population growth requires more housing completions to close the housing gap. The "filtering" process, where older housing becomes more affordable over time, is slow and insufficient alone to meet demand or improve affordability quickly.

• Regional variation: Housing demand impacts vary widely by region due to differing demographic trends and economic conditions, with some metropolitan areas experiencing more acute demand pressures than others.

In summary, demographic changes such as immigration and population growth are primary drivers of housing demand, influencing the scale and pace of housing construction needed to meet needs. Slower growth or population decline could reduce demand, but current projections indicate continued strong demand pressures, especially where immigration remains robust.