Roughly 17 per cent of Canadian baby boomers are planning to purchase a new home in the next five years, a new survey finds.
This is expected to have a meaningful impact on the housing market, as the group, born between 1946 and 1964, represents 1.4 million potential buyers and sellers.
The research, conducted by Leger for Royal LePage, found that more than half (59 per cent) are opting to renovate their current residence rather than buying a new home.
“Don’t count them out yet – baby boomers will impact Canada’s housing market in a big way in the coming years, as another 1.4 million of this large demographic are expected to sell and buy real estate between now and 2023,” said Phil Soper, president and CEO, Royal LePage.
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“While the wave of older consumers will increase competition for condominium property in particular, there is no single type of home that boomers will be investing in.”
The new research “does indicate that smaller cities and recreational areas will attract more investment than major cities,” said Soper.
“This large segment of the population views our big cities as generally unaffordable for retirement purposes.”
The survey found that 44 per cent of respondents across Canada who still have children living at home expect them to move out between the ages of 21 and 25, and 21 per cent expect them to leave between the ages 26 and 30.
Eighteen per cent anticipate their children will move out after the age of 30, with 9 per cent expecting them to depart after the age of 35.
This percentage nearly triples in British Columbia, where 24 per cent of respondents with children living at home expect their children to move out after the age of 35. According to Royal LePage’s Peak Millennial Survey2 conducted last year, 14 per cent of Peak Millennials surveyed are living with their parents.
“Our 2017 research into the largest group of first time home buyers in Canada, which we call the Peak Millennials, showed many were roosting in the family nest well beyond the traditional age of exit,” Soper said. “With this work, we have confirmed that boomers are allowing children to reside at home well into adulthood. Yet they won’t stay forever, and when they go, the folks are going condo shopping.”
Currently across Canada, according to the survey, over three quarters (77 per cent) of boomers own a home, nearly one in five (19 per cent) rent, while a very small number (1 per cent) live with family.
When zooming in on current dwellings, the largest number (61 per cent) of boomers across Canada live in a detached home, followed by condominiums (21 per cent) and semi-detached/town homes (12 per cent).
Of boomer respondents planning to purchase a home in the next five years, 45 per cent are most likely to purchase a detached home, 32 per cent are most likely to purchase a condominium, while 10 per cent noted strongest interest in a semi-detached/town home and 5 per cent said a recreational property.
Retirement Plans and Perceptions on Housing Affordability
When asked about plans nearing or during retirement, one in five (20 per cent) boomers intend on buying a new property, while 71 per cent do not plan on buying a new home. Respondent sentiments were mixed on the desire to downsize, with less than half (41 per cent) stating that they would seek a smaller dwelling in retirement, while just over half (52 per cent) have no intention of downsizing.
Considering recent home price increases in several Canadian markets, more than half (56 per cent) of boomers polled said they consider the housing market in their city or region to be unaffordable. This number jumps to 78 per cent and 63 per cent of respondents in British Columbia and Ontario, respectively.
When asked about their willingness to relocate, over one-third (34 per cent) of respondents nationally stated that they are open to moving to another city or suburb where property prices are more affordable. Of respondents willing to move for improved affordability, 35 per cent would prefer to stay within one hour of their current residence, 30 per cent would be willing to venture further out (one hour or more away), while 20 per cent stated that they are open to living anywhere.
A minority of respondents plan to purchase or reside in a secondary home or live elsewhere for portions of the year. Ten per cent plan to buy a secondary property, while 15 per cent plan to sell their primary residence and move into their currently owned secondary property full-time. Nearing or during retirement, nearly one quarter of boomers nationally plan to live in another city (24 per cent) or country (23 per cent) for at least three months of the year.
Financial Status and Support for Children
Overall, a large segment of the boomer population is on strong financial footing and on a clear path to being mortgage-free, if not already. According to the survey, over three-quarters (77 per cent) of those who own a home have paid off over 50 per cent of their mortgage, and 61 per cent have paid off over 90 per cent. Meanwhile, half (50 per cent) of boomers who own a home have less than 25 per cent of their retirement savings tied to real estate.
If they were to make a property purchase, 54 per cent of respondents stated having a budget of under $450,000, while 25 per cent possess a budget of $450,000 or higher. In the current market landscape, many boomers perceive very little impact from the federal government’s new OSFI measures on their personal circumstances. Half (50 per cent) of respondents do not feel that the new OSFI measures will impact the type of property they can afford. However, one in four (25 per cent) do believe the measures might impact their options, while approximately one in five (21 per cent) said they have caused them to second guess buying a home.
Many boomers are willing to help their children with real estate purchases, with 47 per cent affirming that they would subsidize their child’s home acquisition to some degree. If asked for assistance by their child, 41 per cent would give less than 25 per cent of the home’s total value, while 5 per cent would give 25 per cent of the home purchase price, or higher.
“Baby boomers are the most affluent generation in Canadian history, yet the journey has not been without challenge and adversity. Through several difficult economic recessions, the equity in their homes has proven to be wealth bedrock. This is a generation that deeply values home ownership and very much wants their children to have the same opportunity,” concluded Soper.
Affordability is an issue for boomers in British Columbia. Seventy per cent of British Columbians between the ages of 54 and 72 own their home, the lowest percentage among all regions surveyed. Also, boomers in the region are banking on real estate to fund their retirement. Of the respondents who own their home, 26 per cent said more than half of their retirement savings are tied to real estate – the highest rate of all provinces.
With so many boomers relying on their homes to fund their retirement, 43 per cent said they are planning to eventually downsize their principal residence and almost half (42 per cent) would consider purchasing a condominium for their next home. Thirty-seven per cent would be willing to move to a new area in search of affordability.
“More and more we’re seeing baby boomers in British Columbia downsizing from a detached home to a condominium,” said Michael Trites, managing broker, Royal LePage Northstar Realty. “Increasingly they are transitioning into condos to unlock some of the equity they have built up in their homes, while gaining more flexibility as their health and lifestyle preferences change.”
A vast majority (88 per cent) of boomers in B.C. believe that real estate is a good investment, and 42 per cent of respondents with children stated that they would be willing to subsidize their purchase of a home.
Home to some of the most expensive markets in the county, only 19 per cent of boomers in B.C. consider the housing market in their region affordable – the lowest rate in the county.
Like many Canadians, boomers in Alberta would prefer to stay in their homes and renovate instead of buying a new house. While 19 per cent of boomers in the province plan to buy a new home in the next five years, more than half (58 per cent) would prefer to improve their current home than move.
However, as their children leave home and retirement approaches, Albertans are willing to downsize. Forty-four per cent of respondents said they plan to move into a smaller home in their golden years. Almost one-third (31 per cent) said they would consider downsizing when their children leave home, which is tied with Ontario for the highest rate in the country. Fifty per cent of Albertans, with children currently living at home, expect their children to move out for good by the time they turn 25 years old. Forty-five per cent of those Albertans looking to downsize would consider a condominium for their next purchase.
“Boomers in Alberta vary between those who are quite affluent and those who are still working as a means of supporting themselves. Many of them are staying in their jobs longer than we previously expected,” said John Hripko, agent, Royal LePage Benchmark. “Boomers with a financial surplus are choosing to stay in their larger homes for longer, but they’re also increasingly deciding to help their children put a down payment on their first homes.”
Albertans overwhelmingly believe that home ownership is a good investment (94 per cent), which explains why four-fifths (80 per cent) of boomers in the province own their current residence. They are also willing to help their children get on the property ladder. Half of boomers in Alberta (50 per cent) stated that they would give money to their children to subsidize a down payment, which is tied with Saskatchewan and Manitoba as the highest rate of all regions surveyed. Of those boomers who are willing to help with a down payment, three-quarters (74 per cent) said they would give less than 25 per cent of the total value of the house.
Saskatchewan / Manitoba
Boomers in Saskatchewan and Manitoba are split when it comes to real estate purchase plans. Twenty-seven per cent of respondents in the regions combined said they plan to buy a new house in the next five years, the highest proportion of in the country. However, many are planning to stay in their current homes for as long as they can. Sixty-seven per cent of boomers in the two provinces say they would prefer to remain in their current homes and renovate instead of moving or downsizing – the highest proportion in the country. They are also the least likely (23 per cent) to move to a different city or suburb to find more affordable housing.
Boomers in the region generally own their homes (88 per cent) and tend to live in detached houses (78 per cent), both of which are the highest percentages of all regions surveyed.
“Boomers are opting to stay in the homes they raised their children in. When they decide to leave, it’s mostly due to challenging health conditions or being unable to physically maintain their homes,” said Mike Duggleby, broker and managing partner, Royal LePage Regina Realty. “They are also inclined to help their children with down payment funds, usually five per cent of the cost of a home.”
The willingness to stay at home and help their children may be a matter of financial security. According to the survey, almost three-quarters (74 per cent) of boomers in the region have paid off at least 90 per cent of their mortgage, which is the highest in Canada. In terms of willingness to assist their children, 63 per cent of respondents said they would give their children money for a down payment, the highest of any region.
While many boomers in Saskatchewan and Manitoba want to stay in their homes in retirement, they are not staying put. They are the most likely to say they will spend three months a year in another city (36 per cent), province (22 per cent), or country (35 per cent).
With the rapid appreciation of home prices in the province, boomers in Ontario are the most likely to consider downsizing as they approach retirement. Almost half (49 per cent) of all respondents said they plan to move into a smaller home as they near or enter their golden years, the highest rate in among all regions surveyed. Four-fifths (80 per cent) of boomers in the province currently own their home, and 20 per cent plan to buy a new property within the next five years.
As boomers in Ontario plan their retirement, they are also the most likely to consider changing cities as they look for a home they can afford. Forty per cent of respondents stated that they are willing to move to a new city or suburb where homes are more affordable, the highest rate in the country. Thirty-two per cent of those willing to move would consider moving more than an hour away from their current city.
While most boomers in Ontario would prefer to remain in a detached home when downsizing, many are open to condominium living. Forty-six per cent of respondents said they would consider a condominium for their next home purchase.
“Boomers in Ontario are looking to reduce expenses as they approach retirement,” said Caroline Baile, broker, Royal LePage Your Community Realty. “By downsizing to a condo or moving to a more affordable city, boomers are able to tap into the equity in their homes and have more certainty about their costs. They are looking to transition into a lifestyle that gives them more freedom to pursue other activities without having to deal with time-consuming upkeep and unexpected repairs.”
Half (50 per cent) of boomers in the region said they would be willing to give money to their children to help them purchase a home. Of those that are willing to help their children with a down payment, 44 per cent of respondents would be willing to contribute up to 25 per cent of the total value of the home.
Boomers in Quebec are the most likely to be content with their current living situation. Eleven per cent plan to buy a new home in the next five years, and 12 per cent plan to buy a new home in retirement – both the lowest proportions of all regions surveyed. Almost two-thirds (62 per cent) said they would prefer to renovate than buy a new home and 77 per cent have no plans to move to a new city in retirement – tied with the Atlantic provinces for the lowest proportion of all regions surveyed.
The survey found that these plans remain intact even as their lifestyles change. Twenty-seven per cent of boomers in the province plan to downsize as they approach or enter retirement and 16 per cent plan to downsize when their children move out – also the lowest percentages in the country.
“When boomers in Quebec sell their property, it’s normally for one of two reasons: to pull out the equity to enjoy life or to help their children purchase a home,” said Pierre Lafond, broker, Royal LePage Tendance. “Those looking to rent a property choose that lifestyle to avoid the potential hassle of being a property owner. If they are looking to downsize, they normally ‘trade up’ into a more high-end house or condo.”
Despite widely believing that home ownership is a good investment (89 per cent of respondents), boomers in Quebecare the least likely to own their home (72 per cent own) slightly higher than those in British Columbia (70 per cent own). Half (50 per cent) of boomers in Quebec believe the housing market in their area is affordable.
For the most part, boomers in the Atlantic provinces are staying in their homes as they approach retirement. Eighty per cent of respondents do not plan to buy a new home in the next five years, which is the highest proportion of all regions surveyed. Sixty-four per cent of boomers in the region said they would rather renovate their current home than buy a new property, and 77 per cent do not plan on moving to a new city during retirement, which is the highest proportion in the country (tied with Quebec).
However, almost half (42 per cent) of boomers in the Atlantic region stated that they plan on downsizing during retirement, and they are the most open to spending their golden years in a recreational property. Twenty-three per cent of respondents plan to sell their primary residence and move in to their secondary residence upon retirement, the highest proportion of any region surveyed. If they were to buy a new home as they approach retirement, boomers in the Atlantic are the least likely to consider a condominium (29 per cent), and by far the most likely to consider a recreational property (32 per cent).
“Many boomers in the region are downsizing into retirement style townhomes or condos, versus smaller single-family homes,” said Donna Gardiner Thompson, broker, owner and sales consultant, Royal LePage Gardiner Realty. “Boomers in this region are very conservative and price sensitive. They need to be motivated to reinvest in another property. Many are looking to simplify their expenses and realize the equity from their primary residence. There is also a trend toward high-end rentals, as that option offers increased financial predictability.”
“We are welcoming baby boomers relocating from the west, including Calgary, Toronto and Vancouver, who are taking advantage of cashing out of the big city market and entering into a much more moderate investment for their primary residence,” added Gardiner. “Today’s boomers know what they want their home, and life, to look like. That includes a budget for travel and living close to activities and services within a municipality.”
Like many boomers across the country, those in the Atlantic believe home ownership is a good investment (89 per cent), and they are willing to help their children achieve that goal. Forty-seven per cent said they would subsidize a child’s home purchase. That may be based on the perceived affordability of the region; fifty-five per cent of boomers in the Atlantic say their housing market is affordable, the highest proportion of any region surveyed.