There is a common held perception that Canada’s housing market is by many ways being driven by outside forces, most notably, foreign investment. However, CMHC has recently released a comprehensive assessment of the true drivers of real estate prices nationwide, and it comes down to a grab bag of factors.
While it included better known causes like economic fundamentals, rising disposable incomes, and favourable ending conditions, it also revealed one major driver: demographics.
“Demographics serve as the foundation of a number of issues. This includes the housing market, goods and services, decision making around spaces and places, and anything about our communities that makes them tick,” said Ryan Berlin, Senior Economist at Rennie and keynote speaker at our February Breakfast Event.
We often dichotomize age groups by associating shared values, traits, and behaviours. But Berlin was quick to point out that our preconceived notions are often quite different than reality, especially when it comes to Baby Boomers.
Baby Boomers and Vancouver Real Estate
“Boomers are often viewed as the pig and the python. There were more babies in this 20 year period than we’d ever seen before. So we needed to build homes, build schools, and create jobs once they graduated. Now they’re looking to retire and take on new hobbies,” said Berlin.
In 1966, David Foot published Boom, Bust & Echo, which became a national phenomenon. Foot predicted that the downturn in Canada’s market would continue from the nineties into the 2000’s, because successive generations to the Boomers wouldn’t be high enough. Foot believed there would eventually be too much housing available, causing rates to stay on a steady decline.
Obviously, Foot’s prediction was incorrect, as we’ve seen robust growth in both demand and prices. Affordability has become an on-going debate and a growing concern for Metro Vancouver.
So where are we today? Berlin shares 3 common myths about this generation.
Myth #1: Although Boomers have a lot of klout when it comes to wealth, income and spending, their numbers are shrinking. Millennials have come to prominence. There are currently 692,000 Boomers in the Lower Mainland compared to 860,673 Millennials.
Myth #2: Boomers are retiring earlier and staying in their homes longer. Downsizing is not as prevalent in this generation as expected.
Myth #3: People retire earlier than we think they do. The average age is now 54, not 65. This has very significant implications for our workforce and individual businesses looking at succession planning. It also means they have to bring in people who can somehow pick up the slack left by someone who had 40 years under their belt.
It’s obvious that we have an anecdotal understanding of the role played by Boomers in our society, but most of these notions as Berlin explains are not supported by data or empirical evidence.
So now that we understand more about Baby Boomers, what about Millennials? We’ll share Berlin’s findings in our next blog post. Stay tuned!