Will it be Demographics that Gets Us in the End?
Our housing market is in trouble, many say. That’s due to higher prices, borrowers taking on more than they can afford, and government interference by way of those pesky mortgage rules. But in fact, it may be none of those things that really puts our market in a crunch. It may be the shifting demographics in the country.
That’s what Pacifica Partners Capital Management in B.C. thinks anyway. The group recently published a report indicating that our housing market is where it sits today because of all the baby boomers that purchased most of the homes just a few years ago. Now, as boomers begin to age and enter their retirement years (many already there) that activity will slow down. And there just aren’t enough young people to support it.
But this is not just a theory plucked out of thin air that Pacifica came up with – they have some stats and figures to back it up. One is that two decades ago, the number of people aged 45 to 64 made up just 20 per cent of our population; and in the 90s and 2000s, that number jumped to 30 per cent.
What does that have to do with housing? Pacifica indicates that in other industrialized countries, they began having problems with their housing market soon after numbers in this particular demographic jumped.
Over the past several decades it’s been obvious that the boomers have been scooping up housing, and that was good! There are a lot of them, so this put construction people to work, kept the real estate market busy, and in general, greatly helped support our economy. Boomers didn’t have to worry about their aging parents taking themselves off the real estate market and pulling the entire thing down with them, because they had so many other boomers in their demographic that it didn’t really matter. The market would be supported regardless of who was leaving it.
Today, that’s not the case.
There simply aren’t enough young people to fill in the housing gaps that will be left by the Boomers. And unlike in previous generations, there are not enough Gen Xers and Gen Yers to plug those gaps. And that’s not even considering the fact that these younger generations are struggling with unemployment, higher tuition costs, and more stagnant salaries than the booming generation before them.
Pacifica’s report doesn’t seem to have an answer to the demographics problem, although it does indicate that an influx of immigration may help to lighten the load on Canadian Xers and Yers. The report does question though, whether our job market will be able to accommodate a huge wave of immigration.
Where do you stand on the idea of demographics and housing? Do you think the market will weaken as Boomers continue to age?