Millennials are the target market for most new products and services that companies are looking to sell. But there’s another Canadian demographic that has significant spending power, especially when it comes to real estate. Say hello to baby boomers.
According to a new report by Environics Analytics, the baby boomer generation outnumbers every other age group in Canada. Between 1996 and 2006, the number of Canadians over age 55 increased by 87%. And there will be another 16% increase in the number of baby boomers within the next decade. Meanwhile, between 1996 and 2016, the number of Canadians aged 16 to 54 rose only 14%.
Aside from the increasing number of baby boomers in the country, other factors linked to this demographic have the potential to affect real estate in Canada.
The combination of available funds, good health, spare time, and interest in innovation and technology among baby boomers means this demographic is ready to spend money on anything that gives them a better quality of life, housing included. In addition, data reveals that baby boomers don’t always fit the stereotypes often associated with seniors, such as not being interested in new products, having a limited budget, and being too brand loyal.
Income, Savings, and Investments
The Environics Analytics report found that the average net worth of Canadian households with adults aged 65 and older was $845,600 in 2016, which represents an 86% inflation-adjusted increase since 1999.
Another recent report showed that baby boomers have significant investments in real estate, and that they feel those investments perform better than their other investments do, such as RRSPs, TFSAs, stocks, and bonds. This was particularly true among baby boomers in Calgary, Montreal, Toronto, and Vancouver (61% overall).
Those more likely to say that their property investments have outperformed their financial investments live in Vancouver and Toronto (72% and 68%, respectively). For Montreal and Calgary, the numbers were 47% and 46%, respectively.
More than half (57%) of baby boomers in these four largest Canadian metropolitan areas said they think investing in real estate in their city is a “very good” or “good” idea, and 74% said they would recommend real estate investments to younger generations of Canadian homebuyers.
Downsizing and Purchasing Homes for Offspring
Aside from this trend in real estate investment, many baby boomers are or will be downsizing, creating an increase in demand for smaller homes and condominiums, while also opening up more single-family homes for younger generations who may be looking to start a family.
According to Statistics Canada data on condo ownership, 32.6% of condo owners are aged over 65. In comparison, residents under 35 years of age make up 17.05% of condominium owners.
Younger generations may find themselves competing with baby boomers for smaller homes or condos, but for some millennials, that won’t be a problem. One-third of baby boomers are likely to help relatives – including millennial children – purchase residential real estate by providing a living inheritance.
As Canadian baby boomers enjoy their retirement years and look to spend their significant savings and investment dollars, Canada’s real estate market will be affected by their interest in purchasing property for themselves, as investments, or for family members.