The national average of home prices is expected to rise approximately four percent annually over the next 25 years, but price increases will vary dramatically from city to city.

"Our report confirms the old adage that real estate is all about location, location, location," says 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 seen the largest price gains during the last 20 years, will continue to experience increases above the four per cent per annum national average.

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.

The "stars are aligned" for Calgary and Edmonton to post above-average gains, after 20 years in which home prices have been flat. Favourable economic prospects, stronger projected population growth and a younger population than many other provinces all bode well for strong gains in home prices.

"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," says Mr. Alexander.

Markets such as Ottawa/Gatineau, Halifax, and Kitchener/Waterloo, should experience average growth for resale prices over the next 25 years, the report says.

Several 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 says slowing population growth will be offset by rising home ownership rates, higher personal incomes, 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," says Mr. Alexander.

On the other hand, demand for entry-level homes will moderate as Canada's population gets older.

Demand for housing types more suited to older Canadians – such as condos, ranch-style homes and perhaps smaller size properties – will increase. The shifting population may prove to have its greatest negative impact on the high-end, largest square footage properties.