Living Differently

We’ve all heard repeatedly in the media and through mainstream advertising that single family home ownership is usually a sound investment and savings program that increases in value over time, thus allowing owners to live freely and independently. We would also acknowledge that community connections and schooling stability are often stronger when we grow up with fewer civic addresses.  For many people, the potential benefits of owning a home are even strong enough to be the deciding factor in choosing where to live.  Your parents owned a home, so you should too – right?

But as the cost of owning a home in all major cities in Canada has continued to increase in a decreasing interest rate environment since the economic downturn in 2008, more often these days the majority of Canadians only have two choices on housing: 1) buy, and be burdened by substantial mortgage payments on a loan so big and long it might never be paid off; or, 2) rent, and waive the financial equity gains that might come with ownership. Despite volatile bond yields and fluctuating interest rates in 2018, the financial system continues to push people to purchase homes and condominiums, so we recently asked ourselves “Why?”.

We started by asking what the data from the development community in Canada is predicting will be the most preferred, or frankly required, form of housing in the near term. These are smart people with significant capital, reputations, and businesses at risk, so their insights could be trusted. To understand where their decisions come from, here’s a quick fact check on the current Canadian housing market:

  1. Actual Pace of Apartment Starts: As reported by CMHC’s “Starts and Completions Survey” which tracks the actual housing starts throughout Canada’s CMAs or urban areas, of the 154,808 housing starts year to date through November 2018, roughly 59% are slated to be purpose-built apartments with 25% being developed for sale as single-family dwellings. Compared to the 2017, single-family dwelling starts fell by 14.6% while apartment starts increased 5.2%;
  1. Apartment Vacancy Rates: National vacancy rates decreased for Canada for the second straight year to 2.4% as reported by CMHC in November 2018. This is the lowest national vacancy rate that has been recorded in the past 10 years;

Population Vacancy Rate in Canada

  1. Unaffordability is a Real Concern: As reported by RBC, the average Canadian ownership costs for a single detached home bought in the second quarter of 2018 rose on average to 59.3% of household income, up over 10% from 3 years ago; and
  1. Household Savings Rate: Even more alarming from an affordability and lifestyle perspective is that the household savings rate for Canadians decreased to 0.80% in the third quarter of 2018 as reported by Statistics Canada being the lowest rate recorded through Statistics Canada measured since 1981.

Canada Household Savings Rates

While the allure of single-family home ownership is real, Canadian developers have taken meaningful strides to deliver multi-unit residential properties that are amenity rich and conducive to the changing lifestyles of the current generational cohorts within Canada. Builders actively acknowledge that baby boomers, millennials, Gen X, iGen, or Gen Alpha constituents carry a vast array of interests, hobbies, and views of the world in which they work, live, and play. The flexibility and low-maintenance that apartment living offers can blend well with the dynamic nature of these groups’ lifestyles. Being socially and environmental conscious is also the new norm with community involvement and responsibility a top priority for consumers of all types. Keeping in mind that affordability continues to be the major driver for housing decisions with 50% of first-time home buyers noting it as their most important criteria, all these influences will continue to drive demand and put pressure on builders to create innovative and experiential real estate options in multi-tenant buildings. Maybe it is time to explore the new housing options available to all – and remember – you don’t need to buy a home just because your parents did!

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