About 60% of Canadians live in single-detached homes. Demographic changes suggest that the demand for multiple-dwelling homes, will account for a growing share of residential demand in the coming years. The increase popularity in smaller homes will come at the expense of future demand for single-detached homes, a shift that could negatively affect the value of larger single-detached homes. While this may be a concern for baby boomers planning to trade their single-detached homes for smaller homes, the situation may not be as alarming. New sources of demand and adjustments on the supply side will likely ease the negative impact on the future value of single-detached homes.
The question of whether speculations led to the growing demand for condos in recent years has caused many debates. Past experience suggests that many baby boomers will want to downsize as they age. Census data suggest that there is a trend towards fewer persons per household; this is not because of society’s aging population. This trend will support the demand for smaller units, such as condos or townhouses. Due to the expectation that population growth will remain soft in coming decades, these changes raise the question: Who will buy the baby boomers’ single-detached homes once they decide to downsize to a smaller home?
The changes in the needs of the baby boomers (aged 46 to 67 and account for roughly 29% of the total population) will have a large influence on the housing market in coming years. Since the baby boomer generation is much larger at the tail end of the generation (there are many more younger boomers than older ones), the empty-nest trend will continue and likely accentuate in the coming years. Some of the increase in the share of one-person households can be attributed to the echo boomers (the children of the baby boomers) who are now aged between 21 and 41. This generation will further boost demand for multiple-dwelling units, since the youngest members of the cohort have reached an age at which they are beginning to move out of the family home and enter the market for starter homes and rental accommodations. Aside from demographic changes, other factors such as affordability, the attractiveness of living in the core of a city and the fact there is very little space to build single-detached homes in core areas will support the demand for multiple dwelling homes in years to come.
These trends raise the question of whether future demand for single-detached homes will be enough to support price growth, particularly for homes far from city cores. New young families and increased levels in immigration will boost the demand for single-detached homes. The relative supply for these homes will fall, due to lower construction levels and also because some may be converted into semi-detached units. Therefore, while potential pockets of oversupply might remain, these factors will help balance the market for single-detached homes in most regions and cushion the impact on the value of these homes.
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