According to the 2016 census, there are now 367,770 people in the Victoria census metropolitan area. That is up some 6.7% from 2011, and a growth that is faster than the 4.4% we saw from 2006 to 2011. One thing that Victoria has always been known for is that it’s the land of the “nearly wed and nearly dead”, with a much larger percentage of the population over 65 years old compared to the rest of Canada and BC.
While that saying is quite out of date (sorry to the more seasoned readers!) the vast majority of people in this 65+ age group do own real estate and chances are they’re not that active in buying more of it anymore. Based on the newest census data, we can look at the complete picture as it currently stands.
To look into this further, let’s examine a paper out of the US from 2008 that examined the relationship between age and home buying behaviour. In Aging Baby Boomers and the Generational Housing Bubble: Foresight and Mitigation of an Epic Transition, Myers and Ryu look at the impact of population on housing market trends, and discuss how the retiring baby boomers may unleash a multi-decade reversal of the trend of increasing house prices. Well worth a read if you can access it, if not I will be discussing it further in future articles. They examine what percentage of the population in each age group typically buy a house in any given year, and what percentage typically sell a house. For all 50 states studied, it looked like Figure 3 below.
The highest buying rates were around 25 – 40 years old with a gradual decline after that, while selling rates stayed relatively steady until people hit 70 years old, when they start spiking. In other words, people are net buyers (buying more properties than they sell) until about age 65. At this point it turns around and people over 65 become net sellers of property.
They did find that this varies strongly by state. For example, in lower cost states there was more buying earlier, while in higher cost states like California, people delayed their purchases until they were a bit older. Also in retirement states like Arizona and Florida, older age groups continued to be strong net buyers due to retiree in-migration (Figure 4 below). In some retiree states, people did not become net sellers until approximately age 75.
What is most similar to Victoria? On the one hand we are a retirement destination, but on the other hand we are a very high priced market (closer to California and very unlike Arizona and Florida). So while we can expect a retiree influx to prop up our home purchase rates in older demographics, we shouldn’t expect it to be as large as in Arizona, and we may even see retirees cashing out of Victoria to move to lower priced markets.
One thing we do know for certain is that the boomer wave is heading inexorably towards net seller territory and those numbers are increasing every year. In the Victoria population, we can see that the net sellers category will be increasing heavily as the boomer wave crosses over 70.
We can already see a huge change in the last 5 years, with the percentage over 65 years old (likely net sellers) in Victoria going from 18% to 21% of the population.
So the natural demographics will be pushing us more and more towards an increasing percentage of the population selling more houses than they buy. What exactly is that pressure and how many properties can we expect to see hit the market from demographic forces? Did our growth in the 65+ category come from aging in place or from people coming here to retire? Will the aging trend be counteracted by in-migration and an increasing number of younger people choosing to stay in Victoria as the economy diversifies?
No more time to dig into that tonight, but I’ll keep exploring this in future articles. Is the surge in the older population a net positive or net negative for the Victoria housing market?