Canadians still have the third-largest homes, based on square footage, among 15 jurisdictions — but an influx of new immigrants could begin to shift attitudes, says a new report.

Only Australians and Americans have bigger abodes than Canadians, but accounting and consulting firm PwC predicts the average size of a house, now close to 2,100 square feet, could begin to fall.

“With increased immigration on the horizon, those arriving in Canada may not have the same size expectations, creating demand for smaller units,” says the report, titled Emerging Trends in Canadian Real Estate and released Wednesday.

Chris Potter, leader of real estate tax for PwC Canada said the square footage will continue to come down because of affordability issues.

“That dovetails with immigration and expectations. People looking for places to live only have a few choices. We are seeing this come to bear (with situations) like more than one family occupying homes,” said Potter, in a conference call with reporters to discuss the report. “You see people coming from areas of the world as new immigrants to Canada and finding their ways to (Greater Toronto Area).”

Looking around the world, the average home size shrinks to less than 500 square feet in Hong Kong — last on the list of the 15 countries and regions studied.

Adding to the rise of smaller homes are the supply constraints cited by developers, according to the report.

“Many believe that provincial government land use policies — like greenbelt legislation in Ontario and British Columbia — together with increasing time requirements to get local approvals are factors holding back the supply of available land for development,” the report contends.

Frank Magliocco, leader of Canadian real estate of PwC Canada, said land use issues have led to major increases in the construction of condominiums that will ultimately drive down the overall average square footage of a home.

“For the most part you have the millennials that are going into condos and they may not have the same household formation in them, but a lot of the discussion we are having with developers is the trend (that) longer term families will be living in condominiums,” Magliocco said. “That’s why what you are seeing is some are developing bigger condos that are maybe two bedrooms that were not developed in the past.”

A report this month from the Building Industry and Land Development Association found the average size of a condominium in the GTA actually increased over the past 12 month, the first annual increase in years. The average condo in the GTA is still only 809 square feet but that’s up from 767 a year earlier.

“You take the size (of the average condo) and compare it to average (homes in) a gated community of the past, it is still much smaller,” Magliocco said.

Magliocco and Potter say the trend towards urbanization is part of a greater intensification across the country and not just in the larger and pricier cities.

Another trend the firm sees is more mixed-used developments that combine not just retail and residential, but other commercial space for jobs.

“Some developers are capitalizing on this demand by focusing on mixed-use communities — building several structures, often through strategic partnerships with a plan to create a neighbourhood feel,” said PwC, in the report. “As cities make greater investment in transit infrastructure, we are likely to see more of these mixed-use communities built around key transit hubs.”

Canadians Have the 3rd-Largest Homes, but They May Downsize to Deal with Affordability by Garry Marr | Financial Post