There is considerable discussion in Canada regarding housing prices, who is buying houses and where and what is the immediate future of the housing market.
Dealing with last issues first, there doesn't appear to be any end in sight for low mortgage rates and so the financial climate for buying will be favourable for a while. Canada is tightly allied to the U.S. economy and the situation south of the border indicates interest rates aren't going anywhere anytime soon. Initial forecasts were a freeze for this year with gradual increases in late 2014 and 2015; however, all bets are off now. Interest rates were not going to rise until unemployment rates hit 6.5 per cent and inflation stayed below 2.5 per cent. With the current government deadlock, any movement over time is likely to be slow and cautious
Add to this the fact Canadians are gradually increasing their personal savings rate throughout this year and we have a more stable management of their debt. Average monthly debt payments are dropping, deposits into investments are increasing and Canadians are increasing their mortgage payments. Delinquency and default rates have remained low for the past four years, indicating Canadians are successfully keeping their debt level under control.
It is no secret much of the wealth in Canada resides in the hands of the baby boomers, those born between 1945 and 1965. Although one may think this generation has had their day with the housing market, they continue to have considerable influence on it. As they age, many boomers seek to downsize as they become empty nesters. They may opt to travel more, thereby looking for less maintenance in their residence. The condo market then becomes particularly appealing as an option. Established walkable neighbourhoods with local amenities nearby also become more attractive to an aging population, thereby opening up newer neighbourhoods to echo-boomers, Gen Y and millennials.
If boomers choose to stay in their existing home for extended time periods, they will do so through renovations and upgrades that will allow them to access the various services they require. This then may delay putting their existing homes on the market, thereby necessitating urban boundary expansion in order to accommodate future generations, immigrants from other countries, migrants from other provinces and those looking to upgrade from their current housing status. However, we must remember, given that boomer birth was spread over 20 years, boomer retirement and housing shifts will likely also be spread over 20 years.
Mike Moore is president of the Manitoba Home Builders' Association