November 22nd, 2004

Blurb: Canadians are among the best-housed people in the world.
Following are eight trends that underlie how the Canadian housing picture has changed over the years

Eight key trends in Canadian Housing

By Peter Diekmeyer o

For most Canadians our homes are not just where we spend most of our time, they are also their principal assets. So it's not surprising that we are constantly bombarded with real estate information ranging from renovation strategies and housing starts statistics to pricing data.

But while most Canadians are aware of the fact that the real estate market is red hot, the longer-term patterns are less clear. To help give a better picture, we've compiled a list of eight key trends that show both how and why the Canadian housing market is changing.

(1) Increased home ownership

Canada is increasingly becoming a nation of homeowners. According to Statistics Canada, the number of occupied dwellings in our country has tripled during to 11.6 million units between 1961 and 2001. Of these, 65.8 percent were occupant-owned compared to 63.6 per cent in 1996.

"There's choice, there is availability and financing is attractive,' says Ed Heese, an analyst with Canada Mortgage Housing Corporation. "In most areas, the picture is pretty bright."

The trend toward increasing home ownership is extremely positive, because as the old joke goes: "in all of recorded history no one ever washed a rented car." Homeowners are far more likely to maintain and improve their properties, and they have a greater stake in promoting the quality of life in their local communities. This in turn raises the value of neighboring properties, creating a virtuous cycle.

(2) Seniors are hanging onto their houses longer

Remember during the 1980s, when the experts told us that Generation X would have it made, because house prices would tumble, as aging boomers downsized their homes after their children had moved out? Forget about it. Older Canadians are getting used to the extra space.

"There seems to be a desire among older people to hang on to their houses as long as possible," says Heese. "In many cases you're seeing boomers actually expand their houses, despite the fact that their kids are no longer around."

(3) Bigger houses

Not only do more Canadians own their own homes, but those homes are getting bigger. According to the CMHC, the average square footage of a Canadian home increased about four per cent between 1990 and 2000. That doesn't sound like much, but the trend becomes much clearer when you look at the new home picture. The average size of houses built between 1996 and 2000 was 25 percent higher than those built between 1961 and 1977.

(4) More square footage per Canadian

The housing quality available to each Canadian becomes even more apparent when you consider the fact that average size of Canadian households has shrunk from 3.9 persons in 1961, to 2.6 persons in 2001, mostly due to declining birthrates. That means that each Canadian has far more space available to himself than ever before.

(5) Real estate equity is driving household wealth

Rising real estate prices have made Canadians increasingly richer, at least on paper. The average value of real estate assets in Canadian households has increased by 27 per cent during the past four years. Scotiabank Group estimates that real estate now accounts for about 34 percent of the average Canadian family's wealth, compared to 29 percent just four years ago.

(6) Demographic trends

Like most trends, housing is increasingly being driven by demographics. As in many industrialized nations, more than ever, Canadian population growth is being driven by new immigrants, who tend to concentrate in big cities such as Montreal, Toronto and Vancouver. This trend, runs in parallel with a continued long term movement among Canadians from rural to urban areas. These trends are driving up real estate prices in urban areas, faster than in the rest of the country.

(7) Rising prices

Canadian real estate tends to be a pretty good investment - over the long term. But the accent is on the words "long term." The average price of a Canadian home sold on the MLS rose from $139,870 in 1990 to 206,393 in 2003.

But it's important to remember that most of the increase took place during the last three years. Between 1990 and 2000 the average house price has risen just $24,280 to $164,150. But during the next three years the average price of that home rose another $42,143. In other words it's hard to predict just when real estate will rise. As with equities, its seems that the key to successful real estate investing seems to be "time in the market," as opposed to market timing.

(8) More affordable

But the best news of all is that Canadian housing is increasingly accessible. Despite the fact that real estate values continue to push upward, housing is actually more affordable than it has been in a long time, largely due to declining mortgage rates.

According to CIBC World Markets estimates, the median Canadian family spends just 30 percent of its income on household related expenses like mortgage payments, taxes and insurance, compared to 40 percent ten years ago and 45 percent in 1989. As a result, as bright as it is, the Canadian housing picture is likely to be even better in the years ahead.


Peter Diekmeyer is the Montreal Gazette's management columnist. He can be reached at:


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