A significant stage in Calgary's luxury homes market is the present transition of wealth in terms of real estate from the baby boomers to their children. Baby boomers are those born between 1946 and 1964.
According to a study by Sotheby’s International Realty Canada's CEO, Ross McCredie, boomers tend to upgrade for larger homes and invest more into real estate for the next generation. McCredie conducted a generational analysis on the finances and buying habits of luxury market buyers in Canada.
The study shows that wealthy boomers, instead of downsizing their homes to smaller condos, upsize to luxury homes, having adult children who are still living with them. The trend shows that boomers usually buy luxury homes on debt, despite their capacity to pay in cash, so they can take advantage of the low interest rates.
According to McCredie, the huge down payments for the luxury home would then redound to their children. This comes as a means of succession planning, as real estate is the safest mode to transfer wealth to the next generation.
However, it doesn't always come as a gift. As these are loans or mortgages, liens may be made on their property after making down payment. This keeps their children from squandering their wealth, otherwise they lose their home.
According to the study, real estate buyers are differently situated and possess different generational concerns.
The affluent Generation Y buyers, or those aged under 35, pay for their homes twice higher than the average first-time home buyers, aside from getting support from their family.
However, unlike those from Generation Y, the Generation X buyers, or those born between age 34 to 54, are left out of the generational wealth transfer. Most of them were born of parents who experienced the twin busts in the 1980s and 1990s for real estate, thus not having as much support as Generation Y buyers got from their parents. Generation X buyers are less willing or capable to help out their children to get into the real estate market.
As for boomers, who have witnessed the soaring market, they practically advise their children to invest into real estate now. For them, today is the right time for their children to do so, otherwise they will forever miss the opportunity to be in the real estate market.
Source: The Globe and Mail
For more Information, contact Calgary Realtor Ross Pavl at: http://www.rosspavl.com
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