Most Canadian Homeowners Have No Plans to Downsize

Recently I wrote a Realty Times story quoting professor John Andrew about a trend for Canadians to move to smaller homes and condominiums. Based on a Statistics Canada report, Andrew said demand will increase for smaller units in cities, and there may be less demand for three- and four-bedroom homes in the suburbs.

But since that story, several housing observers have said the baby boomer generation and their children are not finished with those big homes yet.

A recent survey by Leger Marketing, sponsored by Royal LePage Real Estate, found the demand for suburban detached homes remains strong among baby boomers and their children, known as Generation Y.

"Baby boomers are the wealthiest generation in Canadian history," says Phil Soper, CEO of Royal LePage. "They live in large homes with ample space for their many possessions. They love their garages and their yards. This study clearly indicates that contrary to popular belief, most boomers do not intend to downsize anytime soon."

Just over 40 per cent of boomers surveyed said they planned to move, but of that group, almost half plan to buy a home that?s the same size or larger than their current house.

Canada Mortgage and Housing Corp. (CMHC) says that Canadians aged 55 to 64 have the highest rates of homeownership among all age groups, at about 78 per cent. In households where the primary household maintainer is aged 75 or more, 67.9 per cent are homeowners.

"The biggest increase in age-specific ownership rates in recent decades has been among those 65-74 and 75 plus," says Adrienne Warren of Scotiabank Economics.

"Contrary to some dire predictions, population aging will not fuel a demographically induced selloff in Canadian real estate," she says. "Today?s seniors are healthier, wealthier and living longer than prior generations. They are increasingly likely to own their own home and to live in their homes for longer. Many will not need to tap into their principal home to finance retirement."

CMHC says about 85 per cent of Canadians over 55-years-old want to remain in their current home for as long as possible, according to a 2008 study conducted by the federal housing agency.

One reason why boomers are choosing to stay in their larger homes is because the next generation hasn?t moved out yet.

"The adult children of baby boomers aren?t going anywhere fast," says Soper. "Good jobs have proven more difficult for them to find, they?re extending their studies and they?re living at home. It is no wonder the concept of swapping a family-sized home for a small retreat has lost its lustre."

But when Generation Y (born between 1980 and 1994) is ready to buy a home, most intend to purchase in the suburbs, says the Leger Marketing survey. Fifty-five per cent said they would buy in the suburbs, while 21.7 said they would prefer living in the downtown core of a city.

"The young people who make up Generation Y are our first-time home buyers," says Soper. "Like their parents, they dream of owning a lovely house in the suburbs, which provides value as well as access to parkland for children to play and the perception of greater family safety. Even as condominium living becomes more popular across Canada, the study results do not point to a corresponding decrease in demand for traditional single-family homes. For the baby boomers that do head downtown, there is a generation waiting to move in."

Immigrants are likely to become more important to Canadian population growth during the next 20 years and currently account for almost two-thirds of growth.

Scotiabank says that immigrants are more likely to settle in large and mid-sized urban centres than their Canadian-born counterparts, and that immigrant households are twice as likely to live in a condominium as non-immigrant families. Affordability is cited as the main reason for this choice.

CMHC?s Online Guide for Older Canadians says that ethnic groups have different settlement patterns and housing preferences. "For example, immigrants from Hong Kong typically bypass inner-city reception areas in favour of immediate settlement in the suburbs."

It says that a study of a Toronto suburb "found that immigrants from Italy had the highest rate of homeownership (95 per cent) followed by immigrants from Hong Kong, Portugal, Germany, the People?s Republic of China, the Netherlands, the United Kingdom and India. The study also found that immigrant housing preferences come to resemble the preferences of Canadian-born households over time; that is, they tend to choose single-detached homes in low-density suburbs."

A TD Economics report about the long-term outlook for house prices says: "In our projections, we have assumed that baby boomers will not sell their homes in droves, driving down average prices. Even if they did - and the jury is still out on how many will downgrade their properties - baby boomers will not all sell their homes on the same day. These adjustments happen over years, which mitigate their impact."

Published: April 23, 2013

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Source: http://realtytimes.com/rtpages/20130423_cahomeowners.htm

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