It’s likely to be 2016 before the bulk of echo boomers — who outnumber their baby boomer parents — start packing up their rented downtown condos and moving into the new and resale house market, says the Canada Mortgage and Housing Corporation.
Their impact is expected to be just as profound, if uncertain, as it’s been on the rental market where the desire among millenials to live close to work has driven up rents, driven down the vacancy rate and fuelled bidding wars for pricey new investor-owned condos clad in granite and stainless steel.
Echo boomers now account for half of Toronto's population, but where they've going to end up as they move into parenthood remains the great unknown, according to the Toronto Housing Outlook Conference 2013, held here Tuesday.
That’s because the average age of first-time buyers across the GTA is 37 — a number that’s remained surprisingly constant over the last decade as house prices have virtually doubled — and the bulk of millennials are just 20 to 36 right now.
In 2012, echo boomers accounted for 15 per cent of the growth in demand for housing across the GTA, but that’s expected to double to 30 per cent by 2021, says CMHC regional economist Ted Tsiakopoulos.
CMHC officials have just begun analyzing 2011 Census data for the Toronto area that they hope, by next year, will give them a better understanding of where the wave of echo boomers is likely headed.
Traditionally, some 70 per cent of tenants end up buying in the neighbourhood where they rent, the conference was told, so the surge of echo boomers now living in the core or along transit lines is seen as a trend that’s likely to continue.
Affordability, however, is likely to be the major barrier: The average price of a resale home in the GTA hit $539,058 in October, up 4.5 per cent over a year earlier, according to the Toronto Real Estate Board.
In the City of Toronto, the average was closer to $594,000, although detached homes jumped a staggering 12.4 per cent, year over year, to an average sale price of $873,509.
Those high costs are already driving construction of more affordable semi-detached, row and townhouses to cater to echo boomers looking to move up from condos, the conference heard.
But if just one thing remains clear, so far, it’s that millennials are likely to be renting a few more years, which should give the economy time to improve, and along with it their salaries and savings for downpayments, said Edward Heese, a senior market analyst with CMHC.
That should help the condo market continue to stabilize and boost demand for rental condos, with 50,000 new units now under construction across the GTA, many of them investor-owned, Heese added.
In fact, it’s largely because of those echo boomers, whose ranks have been bolstered by immigration over the last few years, that the downtown condo market, in particular, has held up much better than some observers had been predicting just over a year ago, he said.
While condo sales, and prices, softened last year, that market is “adjusting” because young buyers, and women, continue to see condos as an affordable entry point to the housing market, Heese told about 300 mortgage lenders, realtors, developers and planners attending the annual look-ahead by the federal housing corporation.
As well, very few investors put their units up for sale as the market softened, largely because rents, and demand for rentals, remain so strong, he said.
While the vacancy rate is expected to creep up slightly across the GTA in 2014, to 1.7 per cent, and rental rate increases should ease somewhat, the rental market in the core is likely to remain tight. That’s because echo boomers and, to a growing extent their baby boomer parents, remain keen to live close to downtown jobs, restaurants and transit lines, said Heese.
CMHC predicts that housing price growth could actually slow to just 1.5 per cent in 2014, while incomes should climb by about 2 per cent.
That means, for the first time in years, incomes might actually grow faster than house price gains, another little plus for echo boomers counting their pennies.
Sabrina Wong, Sales Representative
Century 21 Atria Realty Inc., Brokerage