The main reason Canadian Real Estate is outperforming expected norms: The demand for replacement income for retirees coupled with low interest rates.

Published September 28, 2015 by Real Estate Leads

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Baby Boomers are a most significant demographic in our society.

People currently of retirement age are the largest segment of population in American, and Canadian, history. Boomers have influenced every common industry and every financial vehicle of every major market – notably real estate. For another example, let’s look at the automobile industry. Simple more people and more families meant more cars.

Baby boomers are also influencing the demand curve in the financial world. Boomers are always ever aging, have been slowing down in droves and retiring. Parallel in time interest rates are at record lows, bond returns and GIC’s are paying below inflation and so boomer’s income replacement plans have not been coming up roses as they expected. In previous generations, retirement income plans seemed rather simple. Retirees took their savings, placed it in a nice 7-10% yielding bond, and lived well enough off their hard work.

Today’s baby boomers are looking for higher-yield investments to replace their former paychecks. Most of them will not be settling for below average returns. This effect is changing our Canadian real estate market, and how it is going to affect the whole real estate investing market.

So boomers are looking all over the landscape for investments that will provide a similar combination of income and security as their retirement income plan. But as they scour around, they are finding fewer and fewer choices. When there are so many boomers with so much cash to invest, this also causes an investment ‘clash’ so the few investment choices that do offer the desired characteristic get bought up quickly; lowering yields; and vicious cycles occur. Case in point: look at how low current yields are on government bonds in both Canada and the US.

This kind of investment circling is why a large percentage of boomers are attracted to real estate ownership and investments to help fill that income mechanism in their portfolio. They believe, when invested correctly, property investment can provide a hedge against inflation, a persistent and growing income, offering the potential for leveraging of capital and capital appreciation.

So, it seems a reasonable idea to market your services to elderly or retired “buyers” too – to encourage them to investigate ownership of well-chosen, well evaluated, well managed property, or any solid financial vehicle based on real estate.