Is it Time You Thought About Downsizing?

Condominiums are the bookends of homeownership: for many people, they make the most sense as first-timers and later, as downsizers. Both demographics are generally more cost-conscious than those in between, less likely to be living with children, and disinclined to spend their weekends doing all the things single-family-home ownership requires like yard work, shovelling snow, mending fences and mucking out eavestroughs.

But while there are certainly intangible considerations when diving into the housing market for the first time — am I ready to give up some of my disposable income and stay home on the weekends if that’s what it takes? Am I ready to be tied down to a mortgage? — the questions faced by those thinking about downsizing are considerably more fraught: Should I downsize now, before my mobility declines? What if I wait too long and it becomes burdensome for my family to help me? Can I continue to manage a house if something happens to my partner? Not to mention the quality of life questions, like how do I want to spend my time? What can I do with money I free up by downsizing?

While a first-time buyer can likely make up income shortfalls or property value dips easily over time, it’s a lot harder for those whose highest-earning years are behind them. Especially for those whose retirement savings are largely tied up in home equity, trying to time the market can be an exercise in sleep-depriving anxiety. What if I wait too long and the housing market bubble bursts? What if I don’t wait long enough and lose out on equity?

To the first question, Milborne Real Estate vice-president Mark Partin says, “There is no housing bubble.” He says that though the market did go through a period of “adjustment and stabilization” in 2010 and 2011, which led to some overselling in the condo market, the 10-year trend says we’re right on track. “Toronto doesn’t have a lot of empty houses sitting around waiting for people,” he says. “The city is full. You need to build 40,000 new spots each year just to keep up with people moving in. Most people who move to the city rent first, but because there’s no new rental housing being built, investor-bought condos become the new de facto rental supply.”

The biggest driver of success in the condo market is affordability, he says. “The average price of a new condo versus a new single-family home was different by about $100,000 10 years ago,” he says. “Today, it’s more like $225,000. In Toronto, the ‘starter home’ is now a condo.” He adds that it’s true not just in the city proper, but across the GTA in the 905 too.

To the second question, Partin says protecting equity while securing a good price on a new condo is an advantage to buying in pre-construction. “When you buy a new condo, you’re going to take delivery in a few years, maybe even four or five,” he says. By locking in today’s prices with a government-backed deposit, you get the best price on your new home, while retaining your old home and its equity for potentially years. And then there are those interest rates. “Unless you’re paying cash, the price of the home is less important than the cost of the money,” he adds. “Interest rates have been so low for so long that we take them for granted, but they’re as low as they’ve been in 50 years.

“We have a highly functioning real estate market,” he says. “It’s driven by immigration, job growth, and low interest rates, and it’s fundamentally sound from top to bottom. Look, you have to live somewhere, and real estate remains the only investment that you get to use while you invest in it. It grows tax free, plus you get a capital gains exemption. It’s the best investment in the universe. I don’t say that because I’m in the industry — I’m in the industry because that’s true.”

Certainly the sheer number of aging Boomers makes downsizing a hot topic, so much so that one of Milborne’s current projects, Pianosi Developments’ Perspective at Scarlett Road/Eglinton in Etobicoke, has created a “White Glove” service designed to help downsizers with all aspects of their big move, like staging their current homes, bridging financing, selling antiques, or whatever else they need.

The fact that mixed-use condo communities are springing up with increasing regularity outside the downtown core is encouraging for those who still like a leafier lifestyle than downtown might afford, but are ready to stop actually raking leaves, not just in Etobicoke and Scarborough, but in parts further afield, too, like Ajax and Markham, which means downsizers have a lot of fresh options.

But even with the increasing availability of desirable choices and the reassurance about market stability, it’s still going to be an emotional process. If you’re thinking about downsizing, ask your friends and family for their support.

And then let yourself get excited about condo living. You may not be pottering around your flower garden come summer, but you’ll miss it less when you’re sunbathing by the pool.