Canadians Planning On Selling Homes To Fund Retirement

“Peter and Mary are in their mid-50s and earn two incomes. They are wondering whether they can retire at 60.
It helps that their three children have grown up. The two oldest are “off the payroll” and the youngest is expected to become self-supporting after he completes university in three years.
Their retirement dreams aren’t extravagant. The couple plan to sell their house and live six months of the year in their condo (where the youngest child is now living rent-free until university is finished).”

– from Financial Facelift, Globe and Mail, 10 Aug 2012

“In Alberta, a couple we’ll call Lars, 57, and Phyllis, 56, waited until their late thirties to have children. Not long after, Lars lost his job with a multinational company, forcing him to retrain for a new profession. Phyllis had an illness that curtailed her career and made her a stay-at-home mom doing part-time work. But they adapted.
Today, one child is in university and one is about to start. The couple has six figures of debt and no capacity to save after paying all their bills out of $7,450 in monthly combined take-home income.
With no more than eight years to go to Lars’ planned retirement at 65, they wonder how can they finish paying the university bills and retire with financial security. …
They plan to boost retirement income by taking advantage of high real estate prices in Alberta. They want to sell their $450,000 house and move to the Maritimes, where, they think, they can buy a similar house for $225,000. The difference would add to their retirement capital.”

– from Family Finance, Financial Post, 10 Aug 2012

Many Canadians are planning to sell their homes to help fund their retirement needs.
There appears to be a significantly sized group of them intending to do this at much the same time.
The majority will be disappointed by falling, in some cases plummeting, home prices.
– vreaa

39 responses to “Canadians Planning On Selling Homes To Fund Retirement

  1. this is very off topic but here is a good link on how a couple built a mortgage free home for 6000 $ http://www.tinyhousetalk.com/mortgage-free-small-house/
    and converting a garage costs 200K in vancouver …

    • $6000 materials. Labour, as we all know, is free. 😉

      • Yeah. You’d have to pay me about $230K to build that.

      • Well if we figure there’s foundation work, utility hookups, permit fees, then add a reasonable quality of finishing on top, not least that there are a few companies around all vying for new business, it’s not like builders are picking fish out of the stream with their bare hands.

        Does “converting” a garage really cost $200K, or are we talking a complete rebuild.

      • Speaking of which… http://www.theglobeandmail.com/news/british-columbia/debate-over-vancouver-fee-system-puts-developers-and-public-at-odds/article4477998/?cmpid=rss1&utm_source=dlvr.it&utm_medium=twitter

        Debate over Vancouver fee system puts developers and public at odds

        “Vancouver got $223-million last year in fees and special charges from developers, an amount equal to about a quarter of the annual city budget.

        But it got a large chunk of that through a unique system of painstaking negotiations that are done project by project – something that Vancouver’s reigning political team and incoming general manager of planning think needs to be simplified.

        The development industry agrees, but former planners worry that residents will lose money for all kinds of community benefits, from parks and daycare centres to cultural spaces and affordable housing, if the system changes too drastically.

        ‘Having a negotiated system allows you to calibrate closely and it maximizes what the public gets,’ said former planning director Larry Beasley, who presided until 2006 over many projects that brought in millions.

        ‘I do not think it makes sense to move to a one-size-fits-all system from the public’s point of view.'”

        If there’s one thing I’ve noticed about budgets, the expenditures are rarely as elastic as first assumed, ergo revenues are adjusted however necessary to balance the books. This means doing some… deeds… with whomever is willing to spend some cash. Green cities, bike lanes, food carts, park services, all distractions from what keeps it all keepin’ on.

      • Ha ha.. i didn’t mean that labour should be free, but it shouldnt be as high as someone mentioning that a housing start = 2.8 man years of work in vancouver, when this couple worked weekends for a year and was able to build a decent cabin.

      • But your personal labour (sweat equity) isn’t taxed. If you’re doing work that you would pay a contractor $60/hr to do, you are saving $90/hr.

      • VREAA, this guy spent every free weekend and a little over a yr to build this. Are you saying you make $550,000/yr? If so, congratulations! But I don’t think the market in Arkansas will bear your rate.

    • Brrrrrrr. Those roof trusses are a little too minimalistic for me. A few cross pieces with plywood gussets aren’t exactly difficult or expensive.

  2. I think it’s a little odd to think that once you retire you’ll uproot your ties to your community and start all over in a new place. Why would you plan to leave all your friends, probably your children and grandchildren, unless they dream to move to the maritimes, too, leave your hobbies, everything familiar and start out on an adventure at that age? Maybe, but I think the majority stay put when push comes to shove.

    • Yeah, I don’t know how many people actually do this. My parents are in the ‘first wave’ of boomers and recently downsized to a townhouse exactly 5 blocks away from their former residence.

    • SFH will get cheaper and MFH more dear as local Boomers look to downsize to smaller condos/townhouses.

      See what I did there.

  3. Dimitri Tishchenko

    The article that VCI linked to has some awesome comments.
    Article: http://www.vancouversun.com/business/First+time+homebuyers+wish+they+second+chance+report/7067627/story.html#ixzz23HRb1zpd

    Comments (by Good Judgement), last one being the best:
    During the downfall of 2008, I was hoping the market would crash, so I can afford to buy a home in Vancouver westside where I grew up. Suddenly, I see the light. Me and my employees pool money together and purchase 10 condos for $250 – $350g and rent them out. By early 2009, the market was rebounding. Fist time buyers entering the market. We started to use the rental money to finance detach house. We were able to finance 5 and also rent them out, renovated them. as first time buyer market gets hot in 2009-2010. We sold those condos and houses to finance purchase of homes in Vancouver westside. Most of the condo almost double their value and 35%-55% ROI on the house since we renovated them.

    We are able to buy enough home for us all and a couple of extras. We renovated those ones and sold them during the time of betting war earn about 75% ROI. We made $5 M and use them to buy new condos and rent them out and hence re-start the cycle. The key is “trust.” We trust each other. All debt are our debt, all assets are our assets. We call it the power buying technique. Here I give you the idea for free. We become a bunch of doer, not a bunch of looser. Those who wish the market claps are in for a surprise. There are still demand out there. There are people who are willing to buy. If there is another first time buyer surge, the market will have another upward ride. Home owners should hold your prices high. You don’t want to go down the record book and been low ball. Hang in there, the market will return.

    I wish there is more home owners on this page motivating your fellow home owners instead these comment are made by a bunch of loser who don’t own homes and who wish the market would crash so they can get in on it. Good luck. We home owner never give up without a fight. Also, keeping your house price high is a patriot duty. We are better than the American markets so we will prove those American economist who say our market are going down wrong. Let us rally together to protect our real estate value.

    • +1. Pure fiction followed by pure idiocy. Thanks, I needed a good laugh today.

    • I told my parents to sell both of their properties already. They are happy sitting on $1M LIQUID CASH WITH NO DEBT. To the author of that post “Good Judgement” I hope you enjoy being a SLAVE TO THE BANKS for the rest of your days cuz you’ll be paying mortgage payments on overpriced, depreciating properties for 30 years. But don’t worry, you can always foreclose them when you are broke from paying strata fees and contractors for repairs. Let me know when you do, cuz I’ll buy them from you, AT HALF OF WHAT YOU PAID FOR THEM.

    • You only have to be holding one or two when it crashes to lose all those years of gains. Plus depreciation of your primary residence. If they pocketed that money last year instead of doing another round of buying, then they might be wise business people.

  4. This is the exact replay of the US housing bubble and crash. Same delusions, same arguments, same result (eventually)

  5. big deal. selling your home and downsizing, or using your home in some way to fund retirement is nothing new, many people have been doing it for many years. why do you think continuing this practice will have a greater (or lesser) impact on home prices?

    • 4SlicesofCheese

      Its nothing new, but simultaneous cashing out by boomers at this scale has never been seen before.

    • No, nothing new. Except the huge demographic bulge that is the boomers heading for retirement. The home-selling strategy has worked great up ’til now as a means to fund retirement, because it is mostly the boomers who have been buying. But what happens if they all decide to sell at once? Who will buy then?

      This is from the 2011 census data:

      “In 2011, census data showed for the first time that there were more people aged 55 to 64, typically the age group where people leave the labour force, than aged 15 to 24, typically the age group where people enter it.”
      http://www12.statcan.gc.ca/census-recensement/2011/as-sa/98-311-x/98-311-x2011001-eng.cfm

      Demography has played a powerful role in the run-up in housing prices in Canada. It will be very interesting to if or how it will influence house prices going forward.

      • It gets worse too. 45-65 has 25% more people than 0-20. 30% if you include mortality. Housing could be a bad investment for a very long time.

  6. “But what happens if they all decide to sell at once? Who will buy then?”

    What if they don’t sell at all? There are other ways of getting equity out of your home to fund your retirement.

    • I hope your not recommending the “reverse mortgage” scam as a viable retirement option.
      http://www.moneysense.ca/2007/12/03/the-mortgage-that-grows/

      • I’m not recommending anything – but people will do things that they feel are best for them, and most people are financially illiterate. If they want their equity and don’t want to move, they’ll look at this option as viable, whether you or moneysense think otherwise.

      • Agreed w/ nuxfan. People are financially illiterate and will work the “best” short term scenario for the most immediate gain w/o regard to what that means later. Eventually the masses will realize that jumping off a high cliff is not a good idea, but by then they’re in freefall with no parachute.

        What’s that quote? “We can evade reality, but we cannot evade the consequences of evading reality” ~Ayn Rand

      • Whether they sell or borrow against their equity, wealth will still be destroyed.

  7. But what happens if they all sell at once….

    Prices go down and it becomes a buyers market again, re inflation on discounted prices.

    Just like down south.

  8. Zerodown brought this to my attention:
    http://cuer.sauder.ubc.ca/download/events/Davidoff-affordability.pdf

    This stuff borderlines on grade A comedy (and I mean that in a good way). He basically tells people worried about affordability to GTFO and to raise property taxes. A lot. Oh and cut income taxes.

    I can’t really say I know better than Davidoff on Vancouver housing issues and don’t know if I agree with some of his points (I can’t claim to have fully thought them through) but he has acknowledged some of the “elephants” in the room quite nicely.

    The biggest one that I would have liked to see addressed was whether the $1500/mo $400K New West dwelling cited in the slides makes any sense at all. I’d like to think no.

    • I really enjoyed reading that presentation.

    • His presentation was delivered irreverent in an awesome new york accent. The average do gooder affordability wonk was very uncomfortable. I loved the simple articulation of economic thinking imagined to be applied by a non gutless political leadership. I’m no economics professor, but I’ve also suggested several times that we can tax away these prices.

      • I’m still trying to figure out how increasing taxes makes things more affordable unless prices drop; maybe that part was heard but not seen?

        Higher property taxes are a political no-go zone so it’s likely a moot point, but a side benefit is that if Vancouver is as rentier and internationally transient as some of my friends claim, increasing property taxes would be a net increase to revenues.

        But yeah zerodown I like how he didn’t really give a f*ck about being diplomatic. The hiring poor kids for entertainment or bussing them in, that’s awesome stuff, great stand-up material if the timing is right. Alas nobody can time the market.

  9. …”The majority will be disappointed by falling, in some cases plummeting, home prices.” – VREAA

    True that. Nevertheless, for the bold… there are exciting alternatives… Either way… ‘Assisted Living’ opportunities abound!

  10. Good luck to the couple who plan to sell their 450k home and move to the maritimes where they think 225k will buy them a new home. I just bought a 450sqft condo in halifax for 222k and that was considered a “good deal”

  11. The boomers complain the city is too expensive for their own children, and meanwhile are trying to max out and sell for a high price in a declining market. But I have had some friends whose parents cashed out the last couple of years and they were able to help the kids buy a place etc. I worry more about Generation X and people who are in huge mortgage debt now – what will their retirement look like in 25-30 years? The boomers will be using up all of the CPP etc so we will pay more to have reduced benefits.

  12. Right along this line – I was talking witha doctor friend who lives in Van west Side. Has “The life”. West side home on 10000 sq ft, golf membership, sports club membership, whistler house, multiple children through private school. When it’s all done however, he said he has to sell the real estate because he has no pension and the investments will never support the lifestyle in retirement. First to go? Whistler – – then plan is to downsize the house.

    Goes to show that it is a very widespread demographic issue that will not allow this market to continue to go up.

  13. really a nice blog about planning and selling homes thnks for sharing

    One Ocean Drive | Midtown Miami Real Estate

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s