Wednesday, May 18, 2022

Why Baby Boomers Are Crashing the Real Estate Market in Canada

In one of the toughest real estate markets ever in Canada, aging boomers are not letting go of their homes

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A new real estate report says the record-low supply of real estate in Canada is fueled by an emerging trend: baby boomers who won’t let go of their homes.

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The tight real estate market is one of the biggest factors in skyrocketing housing prices in most major Canadian cities. And it appears that the wealthy boomers of real estate are again to blame for disrupting the markets.

Traditionally, seniors sell their family homes and reduce or relocate to retirement communities. Born between 1946 and 1964, boomers, who own a sizable chunk of Canadian real estate, are breaking that trend. Old age is coming everywhere.

Over 20 percent of Canada’s population will grow to 65 in the next five years. Many boomers are still working and are healthier than previous generations, so they are not yet ready to move into retirement communities or nursing homes.

Although the trend had already started, and has been well documented in the United States, the COVID-19 pandemic has exacerbated the problem in Canada, according to Engel and Volkers in their new 2021 Year of the Real Estate Report. Boomers have witnessed the tragedy of the pandemic in Canada’s long-term care and retirement facilities and are wary of that future.

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“Baby Boomer’s parents currently live in long-term care facilities, so they have seen their parents living in isolation as facilities have halted visits and residents usually have to stay in their rooms as a result. Engel & Volkers consultants are reporting that clients who would typically be willing to downsize are increasingly delayed,” says Anthony Hitt, CEO, Engel & Volkers America

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Hit says there are some reasons related to the pandemic preventing boomers from moving forward: “First, they are wary of long-term care facilities and second, they are rapidly valuing the size of their homes during the lockdown.”

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The 2020 Royal Society of Canada report looked at long-term care in Canada during the early waves of the pandemic, highlighting its disastrous state. Canada experienced a higher proportion of total country COVID-19 deaths in nursing homes than other comparable countries – compared to 81 percent in Canada, 28 percent in Australia, 31 percent in the US and 66 percent in Spain.

According to the Public Health Agency of Canada, as of March 2021, more than 50 percent of all COVID deaths occurred in nursing and senior citizens’ homes.

Hit says boomers are deciding to renovate or hire personal help inside their homes. “Because of the equity they have earned in their homes, many people may seek private assistance to ensure that they can stay in their homes for as long as they live in the communities they like for as long as possible. “

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This trend is creating supply constraints for first time buyers and young families. “Millennials are starting to have families and are struggling because housing is in short supply for growing families,” Hit says.

This trend was also noted in a study by Royal LePage last summer that found that the majority of boomer homeowners – 52 percent – ​​would prefer to renovate over relocating their current property. The study also found that 75 percent of boomers own a home, and 17 percent own more than one property.

In Canada, the aging trend is smack in one of the tightest real estate markets ever recorded. “There are currently fewer properties listed for sale in Canada than at any point on record,” Sean Cathcart, senior economist at CREA, said in a recent press release on the latest home sales figures for December.

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About two-thirds of local markets were sellers’ markets, and had just 1.6 months of inventory on a national basis at the end of December 2021 – the lowest level recorded by CREA.

A report by the Bank of Nova Scotia found that Ontario, Alberta and Manitoba have the lowest per capita housing stocks.

Yet another factor cited in the tendency of boomers to stay in their homes is the rise in reverse mortgages. Canadians age 55 and older are able to draw on a portion of their home equity to boost their liquid income while living in their homes.

HomeEquity Bank, a leading provider of reverse mortgage products in Canada, recently revealed that the country’s homeowners are now taking out reverse mortgages worth more than $5 billion, the largest amount ever.

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Nation World News Desk
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