BCREA Long Term Housing Demand Projections
A myriad of factors can impact housing demand. A change in interest rates, the level of employment, wages, taxation and even consumer confidence can have a marked influence on the demand for living space. For example, in a period of relatively weak economic conditions people can refrain from forming new households due to a lack of affordability or fear of falling prices. However, over the long term, population growth is perhaps the most significant indicator of housing demand. The equation is modest; the more people there are, the more households are formed and more housing is demanded.
Utilizing population projections from BC Stats, household characteristics from the Census and data concerning the housing stock from the Canada Mortgage and Housing Corporation and Statistics Canada, BCREA's Economics Team has produced estimates of new construction activity to the year 2041 for the Victoria, Vancouver and Kelowna Census Metropolitan Areas, as well as for the province.
Between 2016 and 2041, the population of BC is expected to grow by nearly 30 per cent, which means that an additional 1.39 million people will call the province home. It's not just the total number of people that is important, but also their relative age. The largest nominal growth is expected to occur in the senior population as the baby boomers become a full shade of grey. Their children, the so-called echo or Y generation, complemented by net international migration will also bolster the 35 to 54 year old age group over the next 25 years.
Since housing is typically occupied by more than one person, any tally of housing demand needs to include an estimate of future household maintainers by age group applied against the growth in population. Using this approach, the province is estimated to grow by an additional 632,000 households by 2041. Now, one could simply divide by 25 to derive the yearly incremental growth. However, since the change in population by age group isn't linear and thus not in a straight line, household growth is more staggered over time. In addition, household growth in itself doesn't tell us what type of accommodation will be produced.
Historical trends in the composition of the total housing stock, while illustrative, say little about possible future construction activity because of increasing associated on land supply and the associated acceleration of high density housing production. By applying the recent trend and composition of housing starts against household and population density projections, an estimate of future housing demand can be derived.
We estimate that between 2016 and 2041 there will be approximately 14,000 to 15,000 additional apartment units in demand per year. While the production of apartment units is expected to remain relatively constant, they are expected to grow from half of all housing demand to 62 per cent by 2041. Semi-detached and row housing demand is also expected to remain in a relatively consistent range of 4,500 to 5,000 units per year, while increasing from 18 to 20 per cent of housing demand in the province. Finally, demand for single-detached homes is estimated to decline from approximately 5,000 to 4,600 units per year through 2041, with their proportion falling from 32 to 18 per cent of total additional housing demand.