With all the bad news for condo investors recently, here’s a potential silver lining: Turns out your tiny dwelling might be more appealing in a few years, when Baby Boomers start feeling isolated in their big suburban homes and seek out smaller abodes in urban centres.
The Conference Board of Canada says demand for condos and town homes will be on the rise down the road thanks to changing demographics. That includes an aging population, but also the number of single people buying property.
The rise in both is creating questions around future demand for growth in single-detached homes, particularly in the suburbs, according to Conference Board economist Julie Adès
“The rising popularity of smaller units will come at the expense of the future demand for single-detached homes, a shift that some analysts suggest could negatively affect the value of larger single-detached homes,” Adès writes.
She cites figures showing about 60 per cent of Canadians today live in single-detached homes and that Boomers, those now age 46 to 67, account for about 29 per cent of the population.
While younger people are doing most of the home buying these days, Adès argues that Boomers continue to drive the economy, including the housing market.
As the kids move out of the house and Boomers sit in their empty nest, a large number will opt for smaller accommodations that require less yard work and are near more amenities.
“This trend will likely support demand for smaller units, such as condos and townhouses,” said Adès. “Combined with our expectation that population growth will remain soft in coming decades, these changes raise the following question: Who will buy the baby Boomers’ single-detached homes once they decide to downsize into smaller units?”
Still, CIBC deputy chief economist Benjamin Tal questions whether the units being built (and some argue overbuilt) in cities like Toronto and Vancouver would be attractive to Boomers. They might be looking for smaller, but not as small as what's on the market today, including some units below 400 square feet.
"I agree that from a long-term perspective it is a positive," for smaller dwellings, says Tal. "However the units that they are building now are very small and will not be suitable for many of these Boomers. That is what many builders are starting to build in a way that it will be easy to combine two units in the future."
The number of people living in single-detached homes starts to drop around age 55, notes the Conference Board's Adès, citing 2011 census data.
“While 67 per cent of the population aged 50 to 54 occupied a single-detached home in 2011, this proportion drops to 59 per cent for the population aged 75 to 79.”
But don’t go selling your 4,000-square-foot, three-bedroom, double garage home in Markham, Ont. just yet.
Adès notes increased immigration to Canada will help fill some of those homes left vacant once Boomers depart.
There’s also a chance, as Tal notes, that some of those monster suburban homes can be turned into semi-detached units in some centres.
“Therefore, while potential pockets of oversupply might remain, these factors will help balance the market for single-detached homes in most regions and cushion the impact on the value of these homes,” says Adès.