“Y” the Future of Real Estate is Controlled by the Next Generation

One common element of late 20th, early 21st century sitcoms has been the child waiting for the day they find their independence outside of mom and dad s house. Most people can picture 1980 s Full House s D.J. Tanner stamping her foot against Danny Tanner as she begged for her 18th birthday so she could move out.

However, as the cost of living increases, available (and well paying) jobs decrease, more and more of Generation Y remains in the same bedroom they spent their childhood in.

This means more than just not being able to bring a date home…

suggests that young adults will begin looking for more space in their first residence, whether that is one-bedroom and den or two-bedrooms. They may also be looking for an interior designer near me to make their homes into a dream suite for themselves. This is due to a changing job market, enabling more employees to telecommute and not have permanent office space to go to. In addition to this, as Generation Y enjoys the luxuries of living at home, they adapt to what $650,000 buys you and expects similar finishes in a $200,000 condo.

I know what you re thinking they re dreaming. But as mortgage rules tighten, younger adults are looking for other means of financing their property, and it should be no shock where this money is coming from. The bank of Ma and Pa tend to have some wiggle room in their mortgage to use towards a second place. Adding to this is inheritance, and how that will push the next generation past the bargain and into the comfort they ve been accustomed to.

Currently, developers are building a large percentage of one-bedroom units in their new buildings. Not because of long term demand but because of affordability. This may help them move units today, but the long term demand curve for these smaller units doesn t look great given the coming demographic shift. That means that over the coming decade we will see a larger number of one-bedroom units coming for sale right as demand begins to slow.

This is important to strategic buyer for two reasons:

1. If you happen to have selling your properties as part of your long term strategy, you should position yourself away from one-bedrooms wherever possible due to potential over-supply in the coming decades
2. 
   The rental market demand, especially in more expensive centers, will lean towards two and three bedroom units over the coming decade due to the demographic shifts we are experiencing across Canada (if you are not aware of this major shift, make sure you read the Real Estate Investment Network s Generation Y research).

Suite mix plays a role not only in your buying and financing strategies but also in your operations and long-term profitability.

It would seem that the race to develop 500 sq. ft. budget friendly may be in vain as the next generation will need space. Sure they are selling now, but over the next decade watch out as the demographics move away from these one- bedroom units.