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What Role do Downsizing Baby Boomers Play in the Toronto Condo Market Boom?

Much attention in the Toronto condo market has been paid to potential buyers and tenants in the younger demographic. After all, millennials (roughly aged 15 to 34) are entering the professional world, starting families, and seeking newer, better, and higher-end accommodations by buying or renting recently-constructed condos. But the demand for Toronto condos isn’t only attributable to millennials; in fact, as baby boomers (roughly aged 52 to 70) are entering retirement or preparing to do so, they’re increasingly downsizing from their large, suburban single-family homes into condos. 

As of 2011, condo dwellers younger than 35 and older than 65 made up the largest share of condo owners. How will the older demographic’s urban downsizing affect condo demand in Toronto? What are the benefits to property investors or landlords in the condo market? 

MOTIVATING FACTORS BEHIND THE BOOMER DOWNSIZING TREND

How can we be so sure that the older generation’s downsizing trend will be large enough to have significant impact on the real estate market? A variety of impactful factors make downsizing attractive for baby boomers:

  • A 4,000-square foot home can feel empty and unnecessarily spacious once the grown kids have left home. Condo living allows boomers to downsize their possessions and enjoy the bustling community life of a dense urban neighbourhood once the nest has emptied.
  • As boomers begin to use their post-retirement time to travel the world, they can leave a condo behind with the certainty that it (and their possessions) are secure.
  • As boomers age and begin to cope with health and mobility issues, living in a smaller (often one-story) condo means less walking, stairs, and access to the kitchen and bathroom. Pre-construction condos can often be outfitted with mobility aids, like shower and toilet grab bars, to anticipate reduced-mobility accommodation.
  • Ending the suburban reliance on the car can make anyone healthier and happier, and walkability to neighbourhood amenities like grocery stores, restaurants, coffee shops, parks, and libraries means boomers will engage with their new neighbours and communities quickly, surrounded by the vitality and energy of the city. 
  • When other forms of investment (stock markets, etc.) are underperforming or volatile, home equity can be an easy wealth generator. Boomers who don’t have pensions and ample retirement savings might be looking to cash in to fund their retirement. “If you value every dollar of equity in your home, there’s a strong case for selling now,” writes Rob Carrick of the Globe and Mail. 

WHAT ARE THE CONSEQUENCES FOR THE TORONTO CONDO MARKET?

According to the Conference Board of Canada, more than 80% of new housing demand will come from those over 65 in the next 20 years. And a recent poll reported that 1 in 6 adults in Ontario plans to move to a smaller home in the next five to ten years. 

You might think that condo developers will scramble to keep up with this expanding demand. They’d certainly like to, but keep in mind that build-able land is limited in Toronto’s core. As density increases, fewer and fewer build-able spots remain. In fact, we have already seen a slowdown in new construction. In the third quarter of 2014, only two years ago, construction on new condos in Toronto hit a four-and-a-half year low. And as recently as January 2016, the National Post reported that as the rate of new condominium construction slowed in Toronto. Demand may grow, but supply can hardly be guaranteed to keep pace—and that makes for a sound investment.

Buying property now for the purpose of reselling or renting it over the medium-to-long term will only get more difficult as the city get denser, and less buildable land remains. Anticipating strong (and increasing) demand from both upsizing millennials and downsizing boomers means savvy investors, small and large, know that the time to buy is now.