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Tag Archives: Statistics Canada

Boomers’ condo exodus still a long way off, say experts

Romina Maurino – The Canadian Press

Baby boomers may be looking to trade their traditional single-family homes for the convenience and comfort of the condo craze, but a mass exodus is likely still a long ways off, real estate experts and recent retirees say.

The convergence of boomers reaching retirement age at the end of an era of historically low interest rates has conjured fear about the impact on the housing market of a growing number of homeowners choosing to downsize to condominiums.

Comment: Nope, most of them are aging in place. They are happy to stay in their homes, with cottages or vacation properties. Which is a totally different problem. They are not leaving their houses, which is part of the supply shortage problem.

But not all baby boomers will be willing to forgo the lifestyle of a single-family dwelling, said Miranda McKenna, a realtor with Real Estate Homeward brokerage in Toronto.

“That generation of baby boomers really likes to have the house, the garage, the garden; it keeps them active,” McKenna said.

“For retired people, going into a condo is a nice idea because they don’t have to do anything, but it’s also restrictive. It’s the transition from a bigger house with a yard to a smaller space that gets them.”

Indeed, the latest numbers from the National Household Survey, released Wednesday, suggest condominiums are becoming the domain of both young and old. Among owners, 20% are under the age of 35, compared with 10.5% for other dwellings, the Statistics Canada survey indicates.

As predicted, they are proving popular with the retirement set. 26.1% of Canadian owners are aged 65 or older, compared with 20.7% for other dwellings.

Jane Drover, a Calgary professor who is a year and a half away from retirement, said she expects to end up in a condo, but not for at least a few more years.

“I travel so much that I would like a place where I don’t have to look after yard work or worry about a leaky roof or a pipe bursting,” she said. “That’s a shared expense when you have a condo.”

Comment: Travel has a lot to do with it. My parents, who are seniors, are gone 6+ months of the year. I keep telling them to get a condo, sell the house. When they are at the cottage from May to October and a few trips over the winter, why are they keeping it? They are never there! With a condo, just lock it and go. No fuss, no muss, no worry.

But many of her friends who plan to downsize are looking to move into smaller homes, not apartments, because condo fees can be so high they can feel like a mortgage, Drover added.

Comment: Especially if they get into one of the older, larger condos. Maintenance fees can be $1,600 a month!

Phil Soper, president and chief executive of real estate firm Royal LePage, said many new retirees suddenly find themselves dealing with kids at home.

“The adult children of boomers are living at home at about twice the rate as baby boomers themselves when they were that age,” Soper said. “They need the space to house not only themselves, but also these boomerang young adults who are living at home and working.”

Baby boomers are the wealthiest generation of retirees to date, with almost 80% owning their homes outright, Soper added. “They don’t need the money for retirement right now.”

Financial tools like reverse mortgages, which allow people to stay in their house while still making withdrawals on the capital, also allow older homeowners to stay in their homes longer.

Immigration is also keeping the condo market buoyant.

Across Canada, the new home market, which includes condos and single homes, is being overbuilt by about 250,000 units or about a whole year worth of building, according to TD economist Diana Petramala.

Comment: Right. Except that 80-90% are bought and paid for. How can there be overbuilding when the only condos being built are the ones people bought. They are essentially building on order. When enough people order a unit a specific building, and put down 20-25% and produce a mortgage guarantee from their bank, then the developer builds it. They don’t build them and then sell them! That is why “overbuilding” and “oversupply” are 2 of the dumbest terms ever.

“Immigration is strong, (so) we do think that these units can over time be easily absorbed by increasing demand,” she said.

Comment: And don’t forget that 30% of condos across the country are rented – they serve 2 groups of people, owners AND renters. First time buyers, empty nesters, immigrants, etc.

“Maybe the pattern of immigration is changing … but they are spreading out to areas where there has been more overbuilding, like Calgary, Edmonton, maybe some of the Atlantic provinces, where resource sector is driving good employment outcomes.”

Experts also believe markets across Canada have stabilized after any bumps in home sales following Ottawa’s tightening of lending rules.

Wednesday’s survey numbers also made it clear that many Canadians are swimming in housing debt. About 3.3 million households, some 25%, spent 30% or more of their total income on shelter – mortgage or rent payments, plus utility bills, property taxes and condo fees – exceeding the Canada Mortgage and Housing Corporation’s measure of affordability.

Comment: Actually, CMHC advises keeping expenses to 32% of income, not 30%. And if 25% are at 30% or more, that means a bunch of them (probably almost all of them) are at 30-32%. You can’t get a mortgage if your housing payments are 40% or 50% of your income. The bank simply won’t give you the money. But if 25% of the homeowners are close to – or at – the limit, then that is not good. But the way it is worded is quite misleading.

Those that exceeded the threshold did so to the tune of an average of $1,259 a month, about $510 more than what CMHC’s measure suggests they can afford.

Comment: Huh? You are saying that CMHC suggests that 25% of the country should be spending $749/month on housing instead of $1,259? That makes no sense. First, what can you buy that results in a $749 monthly payment for mortgage, property tax and heat. Even with cheap taxes of $100/month and cheap heating costs of $50/month, that leaves $599 for a mortgage payment. That works out to $143,000 with 5% down at 3.54%. So the CMHC thinks that 25% of the country should have mortgages of $143,000 instead of $226,500? I don’t believe that for a minute and question the validity of the statement.

And while the potentially toxic combination of high household debt and a possible interest rate hike could send the finances of Canadians spiralling out of control, economists believe it’s only a real threat if rates climb suddenly and sharply.

Comment: Which they won’t. The Bank of Canada has recently pledged to keep rates where they are for the foreseeable future. Sure, the bond market was unexpectedly strong, which pushed mortgage rates up, but that can change overnight and bring rates right back down again.

“It’s true that as home prices have risen people have taken larger debts than maybe they’ve been used to, but interest rates are low and debt is actually quite affordable for the majority of households,” said Petramala.

“Our anticipation is that interest rates are only going to be able to go up gradually.”

Soper said he doesn’t believe any changes will happen until well into 2014, and when they do, the market will simply take a breath and adjust, especially if the underlying economic fundamentals stay strong.

“If people remain confident in their ability to make monthly payments, they will just adjust,” he said. “They will adjust their expectations in terms of buying a less expensive home or potentially a different neighbourhood.”

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.

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