The Canadian real estate market has been witnessing several interesting trends in recent times. One of these trends has thrown light on a current phenomenon, i.e. baby boomers in the country are not looking to downsize on their homes, at least not until several more years go by. How this will affect the mainstream real estate market is something that is another story but for the moment, this trend needs to be mapped extensively in order to find out what it is actually unfolding like.
Baby boomers not looking to downsize immediately
- The housing life-cycle of North American citizens usually falls into a predictable pattern.
- The first phase is usually a tiny apartment in the downtown core area in the university days and also in the early career years.
- The second phase is usually started upon having children and people usually sell off their condos for homes which have backyards.
- The third phase is when on the verge of retirement, people downsize.
- Millennials who are older, i.e. those born in the 1980s, are now starting to have children and are naturally entering the second phase of home ownership. Many women are having their first babies at the age of 30 which is 6 years more on an average than the first birth age witnessed in the 1950s and 60s as per reports.
- Additionally, there is a longer delay now for baby boomers in terms of reaching Phase 3.
- Many baby boomers are not looking to immediately start downsizing homes until the year 2040 at least or even later when many of them will be crossing 80 years of age as per latest studies that covered key zones like the Greater Toronto and Hamilton Area (GTHA).
Why are baby boomers not downsizing and how it impacts the housing market
- The housing market may be impacted by way of affecting millennials who are seeking homes with lawns in the front or back and a higher number of bedrooms.
- Most of these homes are owned by baby boomers and they are not quite desirous of shifting out soon.
- Almost 50% of baby boomers reportedly have no downsizing plans.
- Most baby boomers are witnessing the advantages of living in good residential communities and are living out healthier and longer lives. They have also paid for their homes and hence the decision to avoid downsizing.
- Those who turned 65 between the years of 2015-2017 may be living for another 20 years as per several reports. Physical exertion resulting from activities such as weed picking, cleaning and stair climbing will not bother them for many years to come.
- Some baby boomers are also discovering that they will not be getting as much cash as expected by selling their single-family homes for apartments once they take costs of transactions into account.
- In cities such as Vancouver, where realty markets have been cooling, some baby boomers have paused plans to downsize or sell out since they cannot afford to do so at the moment.
- Sales of detached homes have come down to a low level in the city and baby boomers who would have sold their homes otherwise are now postponing these decisions.
- Additionally, baby boomers who do not wish to downsize have other means of support as well. Reverse mortgages have grown more popular, enabling citizens of the ages of 55 and above to drawn down a chunk of home equity in exchange for payments which increase their retirement income while retaining their ability to reside in their own homes.
- The availability of long-term health care at the doorstep is also expected to enable more baby boomers to refrain from downsizing according to experts.
Some other aspects worth keeping in mind
Experts estimate that several baby boomers will refrain from downsizing since they are expected to continue working until they cross the age of 65. This will naturally keep them in their present homes as per studies. The bridge employment phenomenon will be a growing trend, i.e. baby boomers will work lesser hours but will still be a part of the active workforce. This indicates that more baby boomers will not shift out from major cities to suburban areas upon attaining retirement age.
Toronto and much of the GTA could be an example. The downtown core in Toronto witnessed the creation of 150,000 new employment opportunities between the years 2006-2016, smaller communities in the whole region witnessed losses of jobs overall in the same duration on account of lower manufacturing employment as per reports. As a result, experts feel that demand should go up for more family-friendly homes over the next 10 years and a major chunk of this will come from millennials. 70-80,000 units represents the approximate supply gap in similar zones near Toronto and Lake Ontario. These are units which have backyards. Similar trends are also being observed in other cities such as Montreal, Toronto, Calgary and Vancouver among others. Immigration is adding to the pressure overall on these cities in terms of population growth and housing demand.
The lack of housing supply is still keeping prices at considerably high levels. Close to 85% of Canadian citizens who are employed, stay in urban zones. High realty prices are working as a deterrent for millennial buyers with families who are venturing deeper into suburban locations which are located at considerable distances from large cities. Approximately 13,200 millennials shifted from Toronto, Montreal and Vancouver to regions within the province as per reports in 2018. However, the influx of new residents more than makes up for the same as per several other experts. Generation Z (born in late 1990s) is expected to be the predominant market audience in condominium categories in major cities. Those upsizing for starting new families will have to endure longer commutes downtown while buying affordable homes in suburban locations. Some millennials will also try starting families in condos as per studies.
Several reports also talked of how there are close to 5 million spare bedrooms which are located in Ontario and these are majorly owned by people over the ages of 65. Young families should soon start coming back to these homes. With baby boomers entering their 80s and their children living away in the suburban locations, it may perhaps lead to adult children caring for their elderly parents who will also help them out with child care. This will enable everybody to live in the better neighbourhood as per experts.