Over the past few decades, Toronto has experienced an enormous amount of real estate growth within the downtown core and surrounding areas. According to the Toronto Real Estate Board, residential sales in the city have grown almost 40% from 1998 to 2018. As with any growing city, the real estate market is shifting and evolving in order to accommodate the city as it enters its “Manhattanization” stage. With this, a shift in consumer thinking has begun, and it all has to do with one concept: right-sizing.
Right-sizing isn’t a new term, nor should it be confused with typical down-sizing or for those nearing retirement. The concept of right-sizing has been embraced by many metropolitan cities around the world, as living space continues to become more limited. The key to right-sizing lies in finding a living space that fits a person’s day-to-day housing needs and lifestyle, based on their current stage in life.
In the past 3-5 years in particular we’ve seen a shift in what people really need in their living space, even more so as people from foreign mature markets like Hong Kong, New York, and London move to Toronto as these newcomers are already used to small or alternative spaces, and raising a family in a condo or smaller home with limited outdoor space and privacy in their norm.
With this in mind, there are five top reasons why both boomer and millennial generations are right-sizing in Toronto as the city continues to grow:
- Financial benefits. Many Torontonians are faced with high priced mortgages and require significant down payments when purchasing a home or condo in Toronto. Conversely, some property owners have lived in the city for many years and are sitting on large amounts of home equity. Rather than investing in large properties or condos, some are turning to more efficient living spaces or hassle-free renting so they can enjoy benefits of city lifestyle and convenience of being close to work. Additionally, they look at alternative ways to invest in weekend houses or cottages outside the confines of the city limits, with the option to occasionally rent out the property to cover expenses. Others, who currently own large properties are assessing their space needs, rather than sitting on their significant property investments, while the market is hot. This includes the downsizers, who are pulling equity into income producing investments (pension/retirement supplements/income properties) or using equity to help their children buy homes.
- Convenience. Buyers of both the boomer and millennial generations are now looking at convenience and quality of life, as downtown living usually comes with more culture and closer amenities. Condos and apartments offer convenience, and don’t require as much maintenance or cost. As a result, right-sizing has become an attractive option for those looking to downsize or for those looking for low maintenance, affordable and convenient city living.
- Income Potential. While considering right-sizing, we have has seen an increase of clients wishing to purchase multi-unit properties, where buyers can both live and rent portions of the space to tenants, in order to create new income streams on their investments. Not only is this a solution for boomers looking to minimize their upkeep, but also a great way for young professionals and families to immediately see a return on their property or make the leap from condo to house. The income drawn from the rental units often covers the increased mortgage or even produced a profit, allowing them to save faster for their dream home. We’ve also seen an increase in people buying investment properties, often in preparation for retirement, or for something for their kids to have down the road.
- De-cluttering. With the popularity of shows like Tidying Up with Marie Kondo, many are discovering the joy of minimizing their possessions. Although not a new concept, the act of purging unwanted items and maximizing space is on the rise - particularly in larger cities. When right-sizers begin to assess whether they need (or use) certain areas in their homes, such as the dining room or extra bedroom, they often find that they’re only holding on to those spaces to house possessions they no longer need or use. We’re seeing an increase in the number of clients who start to purge and plan years before they “right-size” vs doing it at the time they go through the transition – as well as those who go through “purge cycles” so they don’t outgrow their living spaces too quick!
- Smoother transitioning for the future. Older clients sometimes find themselves in situations where they are forced to leave their current homes due to overwhelming upkeep and costs or pressing health issues. If right-sizing is taken into consideration before poor health may strike, it allows the property owner to still make their own choices, resulting in a smoother transition for the later years in life. If you’re thinking to right-size while in your golden years, start planning years in advance because it can be a very emotional process to give up a home where you have raised a family and made a lifetime of memories. Be sure to have the conversations with appropriate family members and a financial adviser to help meet your lifestyle and retirement needs.
Those looking to live in the city today must rethink and weigh their housing priorities. We need to shift our attitudes and adapt so that our (relatively young) city can continue to grow to new heights. For more on our perspective on re-evaluating housing needs in Toronto, check out our previous blog A Paradigm Shift: Re-Thinking What It Means To Live In Toronto.
Our team has specific experience in helping people right-size, contact us if this is something you have questions about or feel is right for you.