November 30, 2017 | Boomers
It would seem like the world has bent to their will for 50 years. The Boomers, born between 1945 and 1965 have dominated almost everything they moved through, from the rise of hippie counter-culture in the Sixties, to to the money-loving “me” culture of the 80s, to just starting to re-organize how retirement is done as the early set of Boomers hits retirement today.
But sometimes you can’t have it all. As Boomers approach retirement age or have kids leave their homes for good, some will look to downsize their properties. The thing is, Toronto real estate does not appear to be changing for the Boomers, or anyone else for that matter. In other words, when it comes to Toronto real estate, the housing needs of downsizing Boomers are not being met. What they need is larger two bedroom condos, but that’s exactly what seems to be largely in short supply.
Before we dig into this, let’s take a look at the current state of Boomers when it comes to Toronto real estate. To be clear, Boomers, at large, have not proven to be big fans of downsizing. Real estate pundits and analyzers have been expecting a great change in real estate as the Boomers hit retirement, then sell their large homes for condos. The thing is, Boomers, for the most part, are not moving. Like many folks before them, they are sticking with their big homes. No downsizing, thank you very much! To some outsiders, a couple in a six bedroom home may not make sense, but if that’s what you call home, and that’s where you made memories and continue to be happy, then you stick with it.
Reality, though, may disagree. Despite their collective wealth and the fact that many have not downsized yet, many Boomers will need to downsize to fund their retirement. Despite the money they have made, many Boomers, statistically speaking, have not saved enough for retirement. So, downsizing may be the only option. So, it would appear to me that Boomers will be downsizing at some point.
From a Toronto perspective, I have found that many Boomers sell their houses to move into a larger two bedroom condo. As a generation, they have much greater size expectations that the Generation X and Millennials that follow them as far as square footage is concerned. So a large two bedroom condo would be better. From a Toronto perspective, two bedroom condos are becoming increasingly tougher to buy. Compared to other cities, like New York, Toronto has not historically created as many two bedroom condos as one bedroom condos. Toronto has built more smaller one bedroom condos.
On top of that, from other end of the spectrum you will have first-time buyers who are much more likely to buy a 2 bedroom condo over a house, simply because condos will likely be the first purchase for many fist-time buying couples in a city like Toronto where housing has become increasingly expensive. In essence, we have two different demographics converging on the same property type. On top of this, many developers make more money if they sell more units in a given development. Sixty one bedrooms leads to better profits for developers and the city than thirty 2 bedroom units. Soon, however, (and even in some areas already) two bedrooms will cost more/square foot. So, developers may see an advantage to building 2 bedrooms down the road, though it may not be enough.
The issue then becomes, how can we get more 2 bedroom condos built in Toronto? In a less expensive Toronto from a decade ago, some buyers would simply buy two one bedroom units and combine them, but this strategy would not be as effective today with higher prices. In some ways, we can wait for market forces to show developers that it would be in their best interest to build for this growing market. If you believe that goverments can effectively change the market, you could have the government at the city level legislate that more two or more bedroom condos need to be built to accomodate downsizers and young families in Toronto with each now condo project.
Of course, knowing the Boomer, they are not going to wait around for a solution. They may come up with a few of their own. They may even take larger homes and turn them into condo units or just shared housing, shared by two or more families. As the Toronto area grows into an important international hub, the success of this area will lead to some growing pains. I don’t think Toronto has always planned well for its future citizens. Look at how slow we were to start growing our transit to move people efficiently in and out of the city to work. Maybe Toronto will take on the coming lack of 2 bedroom condos and do something about it. Even if they did, it would still take close to 7 years for a condo to be built. We won’t be seeing more of them any time soon.