Population Aging and Housing Demand

Recently the Stephen Gordon wrote about how immigration cannot fix the aging problem on the Worthwhile Canadian Initiative Blog. The main point was the number of immigrants required is too overwhelming to overcome the enormous gap as shown in the chart below.



Ben at Financial Insights also commented on this analysis as it related to housing:

The current immigration rate is wholly inadequate in eliminating the coming demographic imbalance. While it certainly helps, it will be insufficient in entirely eliminating the headwind on house prices set to be exerted by the aging population.

The post at Worthwhile Canadian Initiative derived the amount of immigration required to avoid population aging. This is far more than the what would be required to maintain a constant level of housing demand. This is an important distinction and is best represented in the chart below from Statistics Canada population projections (Medium growth).


In this projection the pyramid is skewed up, as the baby boomers age, but also increases for the younger age groups, albeit to a lesser degree. The future will certainly have more seniors but the decline in housing demand is fully offset under moderate immigration, fertility and life expectancy assumptions.

See previous post here.