Mark Twain’s age-old real-estate adage: ‘Buy land, they’re not making it anymore’. Buying real-estate has worked very well for Baby Boomers. The resulting capital gains and rental income now support a growing portion of Baby Boomers retirement funds.
Is the real-estate bubble about to burst?
Short answer: burst is probably too strong a word.
Long answer: the dark clouds on the horizon are closer.
Four of those dark clouds are:
AFFORDABILITY – who will be the future domestic buyers of real-estate? The massive appreciation in housing prices makes housing ownership ominous for the Gen X, Gen Y and Gen Z buyers.
DEMOGRAPHIC INVERSION – the release of the 2016 census indicates for the first time in Canada that there are more seniors (over 65) than there are young people (0-15). Not only is affordability an issue for new domestic buyers but there will be less of them. This is called a demographic inversion and it is here to stay for the next two decades.
GOVERNMENT INTERVENTION – Vancouver introduced new housing rules to slow their real-estate market by penalizing foreign buyers/speculators. Toronto has now followed suit.
EXPOSURE RISK – for many Baby Boomers their house is their largest asset and in frequent cases it is more than 50% of their net worth.
One solution that addresses all of these risks is downsizing. A smaller property will be more affordable to younger buyers in the future and will be more desirable for other Baby Boomers. The profits from the downsize can be invested in other unrelated assets and securities.
If this is an investment strategy you want to explore then Contact us today.