Tuesday, January 28, 2014

Millennials to drive new homes market

The Millennials are coming! The Millennials are coming!

Actually, they’re already here and they’re flexing their muscles, says Don Campbell, founding partner, senior analyst, the Real Estate Investment Network.

The Millennials are the children of the baby boomers, the generation that changed just about everything forever, but look out for the kids.

“Everyone’s focusing on baby boomers because they’re the biggest cohort, they (have always driven the market) but I tell you, Millennials are actually larger than the baby boomers.

“These people are going to be driving the new home business for the next decade or 15 years (and) you can continue to sell to the 50-year- olds or you can start shifting what you’re building.

“(The Millennials) want something different.”

Calgary’s net migration has reached near record levels since 2012 and many of those newcomers are Millennials, many who are renting, but that is changing, says Campbell.

“When they look at $1,400 rent per month when the mortgage for a starter home is $1,000 per month, they’re going to say it’s time to buy,” he says. “It takes two to two-and-a-half years, depending on the economy, for them to move from renters to buyers. I’m looking at this massive migration (and) I know 18 to 24 months from now the demand on (Calgary’s) housing is going to be massive.

“Yes, it’s going to be kind of nice this year, it’s going to be good, but if you think you’ve got it good this year, you’d better be starting to plan for the long term, because it’s coming.”

Many of the baby boomers’ kids are barnacles (never left home) or boomerangs (left but came back) and the extra time in their parents’ homes has defined their homeownership expectations.

“There will be increased demand for starter homes, but they can’t be the starter homes (built before),” says Campbell. “The starter home market has to be polished a little bit more (than before). It has to be a little bit nicer finish because they are barnacles and/or boomerangers who have lived in mom and dad’s a lot longer than any of us did (and got used to upgrades).”

The Millennials are not yet a car-oriented generation, so the distance from their homes to efficient transportation systems, measured in minutes, is a major factor in their choice of location, says Campbell.

“So many don’t have driver’s licenses (so) when somebody says ‘you know what, we need to spend two billion dollars on a rail that’s going to go from the southeast quadrant,’ cheer them on,” says Campbell. “Distances aren’t measured in kilometres anymore, they are measured in minutes."

“The ring road is going to change what’s going on (and) if you can, develop around LRT, around 800 metres from a station, because people will walk 800 metres to that station, especially Millennials because they don’t have a car.”

The Millennials’ influence is being felt now.

“Calgary is getting younger, the target market is getting younger, changing what they’re looking for,” says Campbell. “They’re going to physically change the city.”

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