Real estate demand from Generation Y, or those aged between 14 and 34 years old, is fueled primarily by loans from parents and grandparents and will combine with other societal changes to alter what real estate is in demand, say real estate analysts.
Some key trends to watch include increased demand for larger units in the future because of a need for home-offices and demand for higher-end small units in the short term, Real Estate Investment Network president Don Campbell told Business in Vancouver May 16.
“I would never say that they’re spoiled but Generation Y’s quality bar is higher than the Baby Boomers’ one was,” he said. “They want quality – nicer countertops.”
The demand for quality from this younger generation is partly because they are likely to have lived with their parents for a longer time and are used to that comfort.
They also have slightly higher salaries and much higher net worth in standardized dollars than counterparts had 30 years ago, according to a BMO study released May 15.
Add to this Rennie Marketing Systems owner Bob Rennie’s assertion that those aged older than 55 years have $163.4 billion in mortgage-free properties in Metro Vancouver and it is clear that, as the older generation dies off, inheritances will make it viable for Generation Y to buy the larger homes they are likely to want.
Parents and grandparents already provide deposits for 40% of today’s first-time home buyers in Vancouver, according to a poll that Rennie’s company conducted.
“Generation Y will have more different jobs through their lives than we as Baby Boomers ever had,” Campbell said. “They will be in more independent contractor relationships than employer-employee. So, they will need home offices and that means larger homes.”
Another trend that Campbell has gleaned from his organization’s research is that there’s a trend among those in Generation Y to buy a home with a platonic friend.
“That leads us to not having small units because you need two bedrooms,” he said.
In Metro Vancouver, developers have so far been trying to one-up each other by building the most livable small condominiums imaginable.
Bosa Properties, for example, in November launched what it called the world's first transformable homes built in a large-scale condominium development.
It called its 320-square-foot homes in Surrey’s Alumni project “transformable” because every square foot of space is designed to be as efficient as possible and the space can easily be transformed from one use to another.
One bedroom units have been such a common unit-type in the city of Vancouver that general manager of planning Brian Jackson told BIV that he is actively encouraging developers to build larger units.
“Developers are going to want to pound out the one-bedroom units because right now, in this moment, they’re selling based on affordability,” Campbell said. “In the future, the demand is going to change to larger units as this giant Generation Y cohort moves through and starts to demand two-bedrooms and two-bedroom-plus-den homes.”
The takeaway lesson for investors who own and rent one-bedroom condominiums is to consider selling now to buy a larger unit.
“One-bedroom condominium prices in the future will not track the same as the rest of the market,” Campbell said. “If the rest of the market goes up, one-bedroom units probably will too but not as much as other homes.”