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Friday, January 13, 2012

Boomers land impact on housing industry

There is strength in numbers; that we know. But what is truly remarkable is the force that vast numbers can apply on reshaping a society- and in this case, an industry.

The concept of home ownership and idyllic living in this country has experienced a major paradigm shift, and is really on the cusp of things to come, mostly because the largest demographic group- the Baby Boomers- are swinging their demographic weight around again- this time to land squarely with a material impact on the housing industry.  

As a real estate professional, part of getting into this market, is to understand where this group is coming from, where they are going and the mechanics of the impact they wield on the marketplace, namely condominium living, home renovations and development of Senior Citizen health care institutions.

A New Model for Housing
According to CMHC’s recently released “2011 Canadian Housing Observer”, which examines and characterizes housing trends in the country, the proportion of senior citizens in the total population is expected to grow from 14% currently to a staggering 24% by 2036. This trickles down to a material impact on the market, as CMHC points out: “Demographic pressures account for much of the variation in the rate of housing construction in different parts of Canada…As people age, their needs are likely to change due to disabilities, medical conditions, changes in their household composition, and/or changes in their financial situation. Population aging therefore requires various forms of housing, a range of models of coordinating housing with support services, and community planning that respond to the needs of seniors and enhance their quality of life.”

While many seniors are electing retirement outside of urban centres, many more are electing a return to the urban core, for a number of reasons. “Economies of scale, the existence of a well-developed construction industry, the often relatively low cost of construction compared to rural and remote communities, and the presence of a wide range of community organizations, seniors groups, faith-based groups, and other civil society institutions interested in serving seniors are all factors that support the provision of housing and supports for seniors in urban areas.”

It’s not just the big urban centres that are drawing this demographic; smaller urban centres are holding great appeal, and are becoming increasingly more popular. In fact, data states that the senior proportion of the population in smaller urban centres has climbed to 16%, and is expected to increase over coming years.

“The result is a growing availability in urban areas of housing designed specifically for seniors and of services that meet the needs of seniors who are aging in their homes, as well as projects based on innovative partnerships that integrate housing and support services.”
What is emerging as well, is that many of these senior households are, or will be single households, which will impact not only space requirements, but must also incorporate elements like affordability on single income, as well as possibly social or care requirements.

Aging in Place
When Judy Garland said famously as Dorothy in the Wizard of Oz, “There’s no place like home", she very much hit the thematic nail on the head for the aging Canadian population. If the choice were theirs to make, CMHC’s Housing Outlook report suggest that there are many seniors who are choosing to stay put, and make appropriate renovations to their existing dwellings to meet their changing needs, rather than downsizing, or moving to retirement housing. The data in their report demonstrates “that a large majority of seniors are choosing to age in place; that is, to continue to live in their current home and familiar community for as long as possible even if their health changes. Some seniors choose to downsize and/or to relocate in order to have better access to services or to live closer to family members, and then age in place in their new home.”
There is also  growth in technology to facilitate and extend independent living, including the development of tools, like, “smart sensors which remind seniors to turn off appliances, record patterns of use, and alert caregivers when the senior’s use of the appliances indicates a potential problem… Another example is monitors for seniors with serious medical conditions to enable them to continue living at home without sacrificing needed care.”

Barry Gordon, Broker of Record, Gordon's Estate Services Ltd., Brokerage says that the goal for many is to remain put for as long as possible, and sometimes major renovations are not necessary; small touch ups that lend peace of mind may be enough in the short term, “In my experience many seniors do their best to keep the core components as low maintenance as possible. They tend to get the windows, roof, furnace, updated- things that could catch them in an emergency if not kept up or that could drive the cost of heating up. They are prepared to spend to maintain their peace of mind. This can extend to bathrooms but not so often kitchens and most often don't get into the elaborate. Not so many really do a big renovation but rather make their home more comfortable and problem free. “Many try to remain where they are as long as they can, and then look at the relocation options. In the past few years, governments have tried to ease the pressure on Long Term Care homes and hospital discharge beds by introducing a variety of supports that help seniors remain in their homes longer. These programs have no doubt had some success, but one of the perhaps unanticipated results is that more seniors are holding off on a move to a retirement residence as an option. Instead, they resist moving at all until they require Long Term Care.”

And as Gordon suggests, sometimes the decision to move closer to amenities and to health care is accelerated by events like the loss of a driver’s licence and associated loss of freedom and mobility.

The Rise of the High-Rise
There has been a surge both in condominium interest and development, partly to meet the growing need to support a rising immigration populations in major centres, as well as property investor demands, but it is no coincidence that the popularity of the housing type is increasing in sync with Baby Boomers approaching and entering retirement.
This shift towards housing taste and requirement is changing the physical landscape of housing in the country. Not only is land scarce in many major urban centres, so developers are moving outwards rather than sprawling upwards, but many retirees are favouring the simplicity of living associated with condo living, and are doing so in vast numbers. CMHC reports that “over half of all housing starts in Vancouver, 48% in MontrĂ©al and 45% in Toronto were intended for condominium tenure.”

Gordon says that there is definite appeal for a specific part of the demographic,” I think the Boomers are moving the condo market in the big cities more than the smaller centres. Early boomers in a big market like Toronto where houses have become so expensive, find themselves with a small fortune in their home-one that can get them a pretty comfortable condo. In smaller markets we see those with good pensions moving more toward condos as their perpetual income gives them the comfort of being carefree about being able to pay the condo fees and the taxes. These folks also often enjoy a few months away in winter as long as their health holds. Condo living makes it easy to turn the key without worrying about a vulnerable vacant house.”