High housing costs are not leading to an exodus of millennials from Canada’s most expensive markets, according to a new Royal Bank of Canada report, which suggests that future demand isn’t under threat in the country’s largest cities.
Robert Hogue, senior economist at RBC Economic Research, said concerns that rising home prices might be “gutting” the millennial population – those aged 20 to 34 – in major Canadian cities, is greatly exaggerated.
“The number of people aged 20-34 is growing at a healthy clip in Vancouver, Toronto and Montreal,” Rogue said in a report released Thursday.
While Hogue said it’s true that some young people are leaving these cities, he added that for every millennial moving away for more affordable housing in the same province, between seven to 12 people of the same age group move in from another province or country.
“Vancouver, Toronto and Montreal continue to be magnets for young, mobile talent. This is the dominant force shaping the urban demographic makeup, not the loss of millennials priced out of the market,” Hogue said.
“Despite some churn in the prime household-forming population, future housing demand isn’t under threat in Canada’s largest cities.”
The report comes after the Trudeau government introduced a first-time home buyer equity plan in the federal budget last month, in an effort to make housing more affordable for younger Canadians.
Hogue said apart from a short-lived slowdown in 2015 resulting from changes in the temporary foreign worker program, the population of those aged 20 to 34 in Canada’s three biggest cities has grown solidly over the last dozen years.
“That cohort in fact swelled by 96,000 (or 2.9 per cent) in these three cities in 2018, by far the strongest increase of the past 12 years,” Hogue said.
Still, while Vancouver, Toronto and Montreal aren’t being “drained of people in their prime household-forming life stage,” Hogue added that the cities’ high prices set an “impossibly” high bar for millennials to become homeowners.
“Expect a greater proportion of them to rent in the future,” he said.