The national average of home prices is expected to rise approximately 4% annually over the next 25 years. However not all Canadian homeowners will benefit equally from this increase, according to a special report published today by TD Economics.

“Our report confirms the old adage that real estate is all about location, location, location,” said Craig Alexander, vice president and deputy chief economist of TD Bank Financial Group. “There are hundreds of local markets, each with their own characteristics and prospects that will determine the value of a home.”

The report concludes larger cities (where land scarcity and demand for housing is the strongest) are likely to experience price gains above the national average. Victoria, Vancouver, Toronto and Montreal, which have had the most rapid price gains during the last 20 years will continue to experience increases above the national average of four percent per annum. Toronto and Vancouver, in particular, will benefit from their ability to attract immigrants, who will play a greater role in the pace of Canadian population growth going forward.

Calgary and Edmonton will also break away from their historical performance. Over the last 20 years average annual price gains in these cities have been flat, but the report states that the “stars are aligned” for these cities to experience above average price gains in large part due to favourable economic prospects, stronger projected population growth and younger population than many other provinces.

“There is no question that the recent dramatic price growth in Vancouver, Calgary and Edmonton is unsustainable, and this poses risks in the near-term. Nevertheless, over the long haul, property values in these urban centres should do well, but the average annual price increase should be at a mid-single digit rate.” said Alexander.

Markets such as Halifax, Kitchener/Waterloo, London, Ottawa/Gatineau and Quebec City will experience average growth for resale prices over the next 25 years.

Conversely, a number of Canadian cities will experience slower than average home price growth for the same period of time, particularly reflecting less supportive demographic conditions.

Demography is the major driver of demand for housing over the long haul and the aging of Canada’s population is likely to act as a constraint on home price growth in the years ahead. However, TD Economics cites slowing population growth will be offset by rising home ownership rates, rising personal income, a lower long-term rate of unemployment and more modest construction of new homes. “Fears that baby boomers will severely depress housing markets as they sell their properties are overblown,” said Alexander.