Are all seniors downsizing to smaller homes or condos?
Commonly-held retirement belief that all seniors will downsize – may not be true.
The emerging fact is that not all seniors are moving down. So what are the implications for the housing market?
Retirement community developers and hopeful homebuyers could be in for a disappointment.
Retirement community developers, retirement homes and condo apartment buildings as well as younger homebuyers have been keeping an eye out for retiring and aging seniors to downsize their homes. While some seniors will move into a smaller home, it does not mean that majority of seniors will do the same.
According to a recent survey by Ryerson’s National Institute on Ageing, 91% of respondents will try “to live safely and independently in their own home as long as possible.” The caveat to this finding is that the survey was done during summer of 2020. The findings may be skewed by the impact of COVID-19 on retirement home residents.
Mustel Group and Sotheby’s International Realty Canada’s pre-pandemic 2020 Generational Real Estate Trends Report: Aging in Place have uncovered similar findings, with 86% of boomer homeowners looking to live in their current home as long as possible.
In the 2016 Census, Statistics Canada found “seniors are less likely to move than the general population”. In 2016, only 5.5% of seniors 65 to 74 years old, and 4.7% of those 75 years and older had moved compared to 13% of the general population in the previous year.
Seniors most likely to move will include those who are separated, divorced, or widowed. Such life events may be triggers for moving as opposed to downsizing as part of a retirement plan.
Baby boomer generation began turning 65 in 2011. By 2024, it is expected that one in five Canadians will be aged 65 and older.
So what are some of the reasons that are keeping majority of seniors from downsizing:
High Costs & Work Involved for Sellers
Seller pays approx. 5% plus HST in real estate fees. And when buying a home approx. 1.6% is paid towards Land Transfer Tax. If buying in Toronto, this amount is double as there is a municipal land transfer tax in addition to the existing provincial land transfer tax.
Steps involved in home closing and home closing costs including legal fees and moving costs also become a burden for the seller.
Rising Per Square Foot Price of a Condo Apartment
Another hesitation may be due to the per square foot (p.s.f) price of condo apartments. Typically condo apartments have been a good option for downsizing but in the GTA, price of a condo apartment is approx. 60% more than the price of a low rise condo or a home when comparing same size properties.
Impact of COVID 19 on High Rise Apartment Living
With the whole COVID 19 pandemic, high rise condo apartment living is not preferred due to the need for social distancing and avoiding common use areas such as elevators and other amenities.
Many Seniors Would Rather Have Their Own Family Continue to Live in their Homes
As a human, a common psychological aspect for staying put in the current home is the need for familiarity and continuity. In addition to this, with the rising costs associated with home ownership, a lot of Gen Y and Millennials are feeling priced out of the housing market. They prefer to live with their parents while giving them some sort of rent to help with some of their expenditures.
So What Does the Future Hold for Seniors?
Figure out ways to access home equity
Many seniors will continue to sell their homes and move to old-age communities or to a smaller home or condo. So demand for single-level housing options like condos and bungalows will also remain high. But if seniors would rather stay in their current homes as long as they can, we need to understand and plan for this as it impacts the cycle for the the next potential home buyer.
If seniors do not sell their homes, this means that there will not be more money added to their nest egg. Financial planners will have to educate them and help access home equity if it’s needed.
Reverse mortgages could be considered
A reverse mortgage may be a good alternative for people above 55 years of age. Interest rates would be higher, but seniors who have limited options may be able to borrow up a good chunk of their home value. Seniors need to bear in mind that this would impact estate size that they may be planning to leave for their beneficiaries.
Become a renter in own home
Another potential option to keep staying in the current home is for seniors to sell their home to an investor and sign a long-term lease agreement with them.
Have open discussions with family
Ideally seniors should be able to make own decisions about where they would like to live. But health, finances and other circumstances may force them to consider options like downsizing or moving to a long-term care facility. They may even happily continue to live in the current home, with their children assuming ownership subsequently. Families with aging parents are encouraged to have open discussions about planning for the future.
Amit Kalia is also a SRES® (Seniors Real Estate Specialist) REALTOR® who is qualified to assist seniors in housing sales and purchases. SRES® REALTORS® successfully complete a series of educational courses on how to help seniors and their families with later-in-life real estate transactions.
Top 5 things to keep in mind when downsizing
- Why are you doing this?
- Are you selling to buy a condo townhouse or a condo apartment?
- Are you selling to become a renter?
- Are you selling to move from the country?
- What are the first steps for downsizing?
- What are you expecting from the home sale?
- When should you sell and buy?
- Where do you plan to move?
These are all really important questions, that you need to be in agreement with your partner and family members. Learn more about the aspirations of Retiring Baby Boomers.
Housing Options for Downsizing Seniors
There are a few options available for seniors as part of specialized assisted or independent community environment and independent living. Learn more about the housing options for seniors that may be right for you or your loved ones.
Consult with Team Kalia to Sell or Buy Your Home or Condo