Aug 27, 2012, Demographics will take edge off housing downturn: CIBC

A downturn in the housing market may not be as bad as feared because the important 25-34 age group will continue to buy houses — some with help from their well-off parents, says a senior economist at CIBC World Markets.

The analysis takes aim at a theory that population growth won’t be strong enough to sustain demand, putting downward pressure on housing prices that have risen dramatically during a years-long period of low interest rates.

“This demographically driven fear is much ado about nothing,” Benjamin Tal, deputy chief economist at CIBC World Markets, said Thursday.

Demographic projections suggest there will be fewer Canadians under the age of 25 and between the ages of 45 and 54, but Tal notes those groups account for a small portion of home buyers.

This is actually the first generation that the parents are better off than the kids and those parents will write a nice cheque

Tal said the group aged between 25 and 34 — the age group that makes up the vast majority of first-time buyers — will continue to grow.

While that growing population of young people may have to postpone buying a house for a couple of years due to their student debt level, their parents can help them out, Tal said from Toronto.

“Many of those young people, they’re lucky, they have wealthy parents,” Tal said in an interview after his housing report was published.

“This is actually the first generation that the parents are better off than the kids and those parents will write a nice cheque,” he said. “The student debt level is not significant enough to really kill the housing market.”

This group of young people also have the option of living with their parents while paying down their debt and saving for a down payment, he said.