It’s hard to downsize when your adult children are still living at home, a situation proving to be a key factor in the booming renovation market.
Canada Mortgage and Housing Corp. said in a report Tuesday that young adults staying home longer have persuaded parents in the 55-64 cohort to pour more money into their aging homes to create more space rather than put the house up for sale.
“Young kids are staying home longer and there is anecdotal evidence that they are moving back, too,” said Ted Tsiakopoulos, a regional economist in Ontario with CMHC. “There is a notion that when you get older, you need less space. But there are changes going on in the housing landscape.”
The Crown corporation says for households headed by someone 55 to 64, almost 400,000 in Ontario could be in the market to renovate. The agency says the age group will make up about 1.1 million households in Canada’s largest province next year.
“Although the average growth rate of home renovations is not likely to match that of the last couple of decades, the province is still set to see an increase. Ontarians are aging, the housing stock is aging, home prices are on the rise and more homebuyers are turning to the resale market — all these factors support renovation spending,” said Tsiakopoulos.
He noted a Statistics Canada report from 2011 which found of the 4.3 million young adults 20-29, 42 per cent lived with their parents. That was up from 27 per cent in 1981.
As tight supplies continue for single-family homes in most of the markets across Canada, people are choosing to renovate rather move.
“One of the things we’ve saw from StatsCan is basement renovation activity have been gaining popularity. Some of it could be young buyers fixing basements up to rent and help pay the mortgage but most of the renovations happening in Ontario are by households over 40. I suspect that these basements are tied to the need for more space,” said Tsiakopoulos.
Brad Henderson, chief executive of Sotheby’s International Realty Canada, said some of what we are seeing is a “boomerang” in which kids leave the house for school, but to get established in career and save for a house they need to come back home.
“As tight supplies continue for single-family homes in most of the markets across Canada, people are choosing to renovate rather move,” said Henderson, adding it’s much more of a Toronto and Vancouver phenomenon.
CMHC noted that historical census data from Statistics Canada show almost 80 per cent of households headed by someone 55 and older prefer not to move.
“This is due to declining mobility when households age. In fact, households only move if health and finances necessitate this or to be closer to family and friends,” the report noted.
“In addition, undersupplied resale markets combined with rising transaction costs stemming from realtor fees and land transfer taxes would further discourage mobility among older households. Housing needs change as a household ages which will require adapting the current home to meet ever changing needs.
CMHC says renovation spending may not be growing at the same rate it was prior to 2008, but it nonetheless contributes to almost 3.5 per cent of Ontario’s gross domestic product. The renovation market is now worth more to the provincial economy than new construction.