A new report from ATB looks at generational trends and migration levels and how it will impact future housing demand in Alberta.
The report points out that while migration is a key source of new blood, “domestic demographic dynamics play an equally important role.”
Highlights of the report:
- Over the past decade, roughly 350,000 new homes were built to accommodate 700,000 more Albertans
- Natural rate of house-hold formation (i.e. housing demand without migration) in Alberta is 19,000 today and will drop to 12,000 by 2020
- Total net migration of 45,000 annually is needed to offset reduced housing demand from the aging population
- Net international migration doubled between 2000 and 2010 to 20,000
In a boom/bust economy like Alberta’s, there can be great volatility from year-to-year, which makes it difficult for the construction industry to match supply with demand.
Yet, common and predictable patterns remain—the most obvious being that children born will eventually move on to start families of their own. This is the natural rate of household formation.
While the household formation rate is influenced by economic conditions and housing affordability, causing either occasional surges in demand or weak periods, it tends to even out in the long run. This is why given assumptions on birth, death and migration rates, a rough estimate of the natural rate of housing demand can be made.
Clearly the trend towards smaller families, which started decades ago, will have an impact on the housing market. This isn’t to say it will cause a glut in housing or a precipitous drop in prices, as it’s hard to say how the market will adjust. The most plausible scenario would simply see new housing activity slowdown, which would have its own implications for the local economy.
One cannot escape the fact that even in Alberta the population is slowly aging; going forward, the province will come to rely increasingly on migration as a source of population growth and new housing demand.
These migrants might certainly be coming given buoyant projections for Alberta’s energy sector, but we shouldn’t hold our breath expecting the real estate market to take off like it did in 2006 unless we see in-migration begin to rise precipitously
Read the entire report here