Will slowing population growth affect the Canadian housing market?
A condominium under construction in Toronto, on Saturday, February 4, 2012. (THE CANADIAN PRESS/Pawel Dwulit)
Statistics Canada released preliminary population estimates last week that suggest some of Canada's biggest provinces are adding people at the slowest rates in years.
Population growth is often cited a major driver of the housing market -- more people equal greater demand for homes.
Many will therefore ask what a slower population growth rate means for real estate prices.
For example, Ontario added about 110,000 people from July 2014 to July 2015, instead of the roughly 135,000 it added each year for the five years before that. That's 25,000 fewer people who need homes. It's also the slowest growth rate since 2007.
Alberta has seen an even bigger estimated drop: about 90,000 people added in the past year compared to 117,000 the year before. That's 27,000 fewer new people looking for places to live. (Economists attribute that change to the decline in oil prices, which means fewer jobs to attract people from other countries and provinces.)
So if there are 25,000 fewer people in Ontario and 27,000 fewer in Alberta looking for places to live, will prices fall in those provinces?
Robert Hogue, a senior economist with RBC Economics Research, said slowing population growth “should not be overlooked,” but added that it is unlikely on its own "to cause the market to crash or to doing anything like a major downward correction.”
“It might be an issue if builders don’t react,” he said. “But builders don’t typically work like that … typically they would not pour the foundation on a building until that building is already sold.”
In other words, as long as the pace of new housing construction slows enough to match demand, prices shouldn’t be greatly affected.
Thomas Davidoff, an economist at the University of British Columbia, also said he is not worried about a major price correction from slowing population growth.
“The Ontario number is pretty low, but not shocking,” he said.
“I’m actually pleasantly surprised by Alberta,” he added. “I would have thought you’d see an exodus.”
Estimated annual population growth over the past decade, as of July 1: