Canada's luxury home market driven by baby boom generation
They're trading up to homes with room for Grandma and handing over down payments to their kids
The baby boom generation continues to wield strong influence in Canada's luxury housing market, both by contributing to down payments for their children and by trading up to more expensive homes, according to a report from Sotheby's.
There are 9.6 million people born between 1946 and 1965 — almost 30 per cent of the Canadian population, according to the report from Sotheby's International Realty Canada released Wednesday. Now in their 50s and 60s, the boomer buyers of luxury homes tend to have incomes of about $300,000 to $500,000 annually.
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So it's no surprise they can afford the price of entry to traditional luxury neighbourhoods, even in Vancouver and Toronto, where $1 million buys only a modest detached home.
But there are some surprises in where they spend their money: In the luxury market their idea of 'right-sizing' is buying a 3,000-square-foot condominium, but all on one level, or possibly buying a bigger home in a better neighbourhood with room for elderly relatives or adult children who still live with them.
Better neighbourhoods for the boomers are traditional luxury areas (Forest Hill in Toronto, Shaughnessy in Vancouver), filled with people just like them, Sotheby's reports.
Because they entered the housing market years ago, the boomers have benefited from the steep run-up in housing prices and are able to spend more than younger buyers. The typical price range of luxury property purchased is $2-5 million in Vancouver, $1-4 million in Calgary, $2-4 million in Toronto and $1.5-2 million in Montreal.
By contrast, generation X and generation Y choose more diverse neighbourhoods.
For those aged 36 to 50 (generation X), choosing a home close to good schools or that reflects their new-found affluence is more important.
For people 35 and younger (generation Y), a luxury home is more likely to be a downtown condo, preferably new, with a trendy urban neighbourhood.
Helping out the kids
Wealthy boomers are helping out their generation Y children with hefty down payments for those condos. A majority of young buyers of properties priced at over $800,000 had help from the bank of Mom and Dad.
That echoes the findings of a Genworth study released Tuesday that found middle-class boomers are also helping their children with down payments for homes – in every price range.
Those aged 35 to 50 were less likely to get help from family, and more likely to suck up the cost of a mortgage for a luxury home.
The entry price points of generation Y luxury homebuyers range from $800,000-$1 million in Vancouver, $800,000-$1.5 million in Calgary, $800,000-$2 million in Toronto, and $400,000-$1.5 million in Montreal. These entry prices are nearly double the cost of a home for the average Canadian first-time homebuyer.
"The luxury real estate market is not only shaped by economic forces, it's driven by generational values and demographics," Ross McCredie, President and CEO of Sotheby's International Realty Canada, said in a news release.
"Insights into preferences across generations allows us to understand housing trends and to anticipate their future impact on the market."
Sotheby's report is based on interviews with its realtors in markets across Canada.