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Housing Figures update
This report responds to the 10 May 2017 request by the Honourable Elizabeth Marshall to provide an update of PBO’s 13 December 2016 report “Household Formation and the Housing Stock: A Stock-Flow Perspective”. The updated report includes revised population data over 2012 to 2016 and projections to 2021, as well as 2016 housing construction and residential investment data. In addition, the outlook for the housing sector has been updated to incorporate PBO’s 28 April 2017 Economic and Fiscal Outlook.
This report provides estimates of household formation and the housing stock in Canada, and also attempts to gauge the degree of balance in the housing sector, both for new housing units and for the overall housing stock. Our assessment, however, is based on housing data and indicators at the national level, which can mask important variation across regions. An assessment of the housing sector at the regional, or Census Metropolitan Area (CMA), is beyond the scope of our report.
• Over 2012 to 2016, we estimate that the number of (net) new households formed outpaced the construction of new housing units, reversing the trend observed since 2001.
• The reversal of this trend helped reduce the national vacancy rate from elevated levels, resulting in an apparent balance in the housing market in terms of the overall supply and demand for housing units in 2016.
• PBO’s April 2017 Economic and Fiscal Outlook incorporates a significant decline in residential investment—beginning in the second half of 2017 and continuing into 2019—that is driven by rising household borrowing rates and a deceleration in house prices.
• Based on PBO’s April 2017 outlook, we project that household formation will continue to outpace housing construction through 2021, pushing the national vacancy rate below its long-term historical average.
Compared to the outlook for the housing sector presented in our December 2016 report, household formation has been revised up due to higher population levels and housing construction has been revised lower, reflecting higher household borrowing costs. Consequently, our outlook for the national vacancy rate has been revised lower and now suggests excess demand in terms of the overall stock of housing units over 2017 to 2021.
We would again caution that our estimates of household formation over 2012 to 2021 reflect only the demographic demand for new housing units. Including behavioural effects (through changes to age-group specific headship rates) could affect our estimates of household formation and the national vacancy rate.