National Post - Financial Post Magazine
PIE IN THE SKY
IT’S A NICE THOUGHT THAT THE BOOMERS WILL ALL SOON BE MOVING INTO CONDOS, BUT IT MIGHT BE ONLY THAT
It’s a nice thought that boomers will all soon move into the downtown condos soon to be vacated by the millennials, but perhaps that’s all it is.
A million-dollar home sure doesn’t look like it used to. In some cities, it can be downright dowdy. For example, $1 million —$ 1,012,172 to be precise — in April would have bought an average single-family home in Toronto. Not a mansion on the Bridal Path, not even a nice place in the tony Rosedale or Forest Hill neighbourhoods; just an average single-family detached home. And those places are selling like mad, with the Toronto Real Estate Board reporting 19.2% growth from a year earlier.
Fortunately, those numbers tailed off in subsequent months, hitting an average of $865,635 in mid-July, still up 8.8% year over year. The reason for such price appreciation is simple: There is a limited supply of detached homes because no one is building them anymore. Even the suburbs are being covered with semi-detached homes, a move by homebuilders to maximize the potential profits of their land holdings. The demand for standalone homes in the big cities simply outstrips the current supply and there won’t be much new stock added in the coming years.
But some market watchers expect that dynamic to change in the coming years as the baby boom generation starts unwinding. The argument, so it goes, is that a tsunami of boomers won’t need the larger homes they currently occupy now that their kids have moved out so they will downsize, mostly into condos in downtown cores, close to cultural amenities and health-care facilities.
A poll by condo developer Harmony Village found that six in 10 respondents
50 years or older plan to sell their existing home and buy or rent smaller accommodations within five years. The vast majority ( 88%) of them owned a detached home and another 6% had a semi-detached home. The top three reasons for moving were to reduce maintenance work ( 81%), lower the cost of living ( 80%) and live in a smaller home ( 62%). More than half said they would use the surplus cash from downsizing to help finance their retirement years.
It’s certainly a nice thought: the older generation making room for the echo generation that is entering the family building
years. But perhaps it’s just that: a thought. Demographics, human nature and common sense suggest there won’t be a wave of downsizing so much as a series of ripples and there hasn’t been a lot of movement yet.
“With the uncertainty in the economy, people are a little unsure of what to do and may be holding back on making decisions,” says Doug Norris, senior vice-president and chief demographer at Environics Analytics. “The other thing is that, overall, if you ask people, the majority will say they want to stay in their homes as long as they can. That could push them well into their mid- 70s.”
There may be some older people moving into condos, but Norris says it’s too early to tell if it’s a trend. The decision to downsize generally occurs when a person’s health deteriorates to the point where he or she can’t do the gardening, shovel snow or generally take care of a larger home and property. “That’s still ahead of the boomers so it may be true there will be a lot of downsizing and we haven’t seen it in large numbers yet,” he says. “If that is the case, we’re not going to see that for a few more years, although we’ll certainly start to see it increasingly over the next decade.”
One thing is certain: The percentage of adults living in single-detached homes is most prevalent among those between 40 and
70, according to Statistics Canada’s analysis of the 2011 census, with the peak being
66.6% of those aged 50-54. The percentage quickly declines from 70 onward, hitting a low of 35.2% for people 85- plus. Given that the census splits its stats into 15 age groups, it’s a little disingenuous for market commentators to talk about change in terms of waves or even tsunamis. Demographics, says David Foot, a noted demographer and author of Boom, Bust & Echo, is much more about incremental change. He says most seniors generally don’t want to downsize because they want their grandchildren to visit and stay. The front end of the boomers are now in their 60s while downsizing begins in earnest when people are in their mid- 70s. “The front end of the baby boom, born in 1947, is not going to be that age until 2022,” he says. “The big downsizing, if it is going to occur, is almost the next decade not this decade.”
By 2025, 20.4% of Canada’s population will be over 65, making the country one of
21 in the world that is “super aged,” according to a report by ratings agency Moody’s in August. The aging of the global economy will “dampen economic over the next two decades” and increase demands on pensions, health care and proper accommodations, which is why so many people are interested in what the boomers will do.
But the tendency to talk about boomers as one big analogous group is also incorrect. “The diversity gets underplayed,” says Norris, who divides them into several different groups. “People like to try to generalize, oh the boomers are like this or that and are going to have this impact. Well, they are a big group and the numbers will have an impact, but exactly how may be in very many different ways.”
Of course, because there are so many boomers, even a small shift can have a big impact. Some boomers — say, those without grandchildren or those who put a higher priority on travel —will downsize in their
60s. But those are small groups. Norris says around 20% of people over 55 will move within a five-year period. Push that out 10 to
15 years and perhaps close to half of the generation will have moved over a 15- to- 20- year period. The questions are where they are going to move and from where, and whether they are going to move less or more than the seniors of today. Norris is leaning toward more moving, but certainly not less.
For one thing, boomers are less likely to have spent most of their lives in just one house. This will be even more true of subsequent generations. But boomers also differ from their parents and grandparents in another way: they helped build up suburbia instead of staying in major cities. “The suburbs were largely developed in the ’ 60s, ’ 70s and ’ 80s, large homes, large tracts of land in many cases,” Norris says. If their children stay in the suburbs, it’s quite possible they will want to stay nearby, possibly in condos, if they are built for that purpose, but perhaps apartments if they don’t want to go through the hassle of purchasing a new home. Such a trend hasn’t shown up in the data as yet, Norris say, but, anecdotally, he’s noticed seniors filling the new apartments that are going up near his home in Kanata, Ont., a suburb of Ottawa.
But boomers may not differ from previous generations as much as we like to think. We generally believe that boomers live more active, healthier lifestyles because they’re living longer, but Foot points out that measures of obesity and overweightness don’t seem to have changed all that much. Other than a reduction in smoking, advances in medicine are likely behind our increased longevity. Most medical research until the
1970s focused on reducing infant mortality, but the industry since then has been far more interested in diseases of the 50- plus set and that’s only going to increase as the boomers move through the system.
Another big argument against the trend of boomers moving to condos is that a lot of the condos being built simply aren’t appealing to people in their 60s and 70s. “If you’re going to downsize, you don’t want an
800- square-foot condo, that’s for a 20- something,” Foot says. “You want a 2,400- square-
foot condo, or three 800- square foot condos, if you’re going to downsize.” But when someone buys three condos, we call them speculators, not home-seeking seniors. In any case, converting two or three units into one isn’t as simple as knocking out a few walls, although the idea of having a couple of full bathrooms and extra rooms would certainly enhance the possibility that children and their children will spend more time at grandma’s place.
The lack of suitable condos may even contribute to the collapse of that market, Foot says. As the echo generation finally tires of downtown life and moves into bigger housing, whether still in the city or further afield, there just isn’t enough of the younger generation to fill the small condos they’re leaving behind. The big push behind the condo boom of the past 15 years or so has been the echo — or millennial — kids, the first of whomwas born in 1980.
“I don’t see a collapse in the suburban housing because the echo kids are going to move out there,” Foot says, noting the fastest-growing community in the last census was Milton, about a 40- minute drive west from downtown Toronto if there isn’t any traffic, where there are plenty of family homes with backyards for the kids to play in. “But I see a huge collapse in the condo market unless the condo guys are smart enough to reposition their units, knock down some walls and create 2,400- square-foot units and market those to the boomers, particularly those who have a second place already in Muskoka or somewhere like that.”
In short, some seniors will stay in their homes, some will sell and move into nearby condominiums, apartments and smaller houses, while others will up and move to towns such as Collingwood, Cobourg and Brockville, Ont., that are picturesque lakeside communities close enough to major centres. Atown like Cobourg is clearly aging, with the decision to close one of its two high
IF YOU’RE GOING TO DOWNSIZE, YOU DON’T WANT AN 800-SQUARE-FOOT CONDO, THAT’S FOR A 20-SOMETHING. YOU WANT A 2,400-SQUARE-FOOT CONDO
schools due to a lack of students proof of that.
“They’ll still want to come to the city, because that’s where the good theatre is and good symphonies and things like that, which you’re also likely to spend more money on when you get to your 50s and
60s,” Foot says. “But you’ll see also theatre in Cobourg improving quite dramatically because they won’t necessarily want to come all the way downtown all the time.”
If there is a mass exodus, seniors better hope there isn’t a housing correction first. They are the ones who would lose in such a scenario, says David Kaufman, president of Westcourt Capital Corp., because they’re relying on the equity value they’ve built up to help fund their retirement lifestyle. A 20% correction cuts the value of a $1.3- million home down by $260,000, while a $650,000 condo loses $130,000, assuming all real estate suffers the same loss. In other words, they would lose $130,000 that was earmarked for the theatre, symphony and nice dinners out.
Of course, it all depends on how each individual reacts. “It could well be quite different for more urban vs. rural,” Kaufman says. “The urban folks could be flocking to the townhouse developments that have condo amenities, but at least allow them to feel like they’re still in a house.”
That’s what Norris did. He lives in what could be called an adult community in Kanata. There’s a shared swimming pool, the snow is plowed and the grass is cut. Most of his neighbours are in the 65to- 75 age bracket and generally retired. “We downsized from a big four-bedroom suburban house when the kids left and this was attractive to us,” he says. “It’s still a fairsized house so there’s lots of room for us. We are sort of thinking maybe we do want to go onto a condo; it never stops.”