housing
05. housing
While we often speak to the value of mortgage-free equity with a view to its impact on the market in the future, the truth is it's already having a significant impact.
A RUN ON THE BANK OF MOM AND DAD
In Metro Vancouver, 40% of principal residence homeowners are mortgage-free. It should be noted that this means no mortgage whatsoever, so this does not include those with 1% of their mortgage balance remaining, only clear-title. This adds up to about $400 billion in mortgage-free equity in our region, of which 53% is held by those aged 55-75, 25% by those 75+, and the remaining 23% by those 25-54. Among other things, this is an indication of why changes to interest rates don’t affect everyone equally and also of a deep pool of capital from which many are able to draw on when they need it. And while the amount of mortgage-free equity within our market has been consistently growing over time, there is also a portion of that equity which is released each year, either through the sale of a home or the addition of a mortgage. We can measure that release by examining the 75+ age group and tracking mortgage-free equity households that drop out of the census over time.
In the period from the 2011 census to the 2021 census, $48 billion in mortgage-free equity was released amongst homeowners aged 75+ in Metro Vancouver. That’s an average of almost $5 billion per year or $400 million per month of capital being freed up from homes. To put that into context, total MLS sales volume in 2022 in the Vancouver Region was roughly $53 billion, or $4.4 billion per month. We can’t track exactly where all the equity went, and it’s likely it wasn’t all redeployed back into the local real estate market, but it’s also likely that a significant amount of it was invested back into real estate and a good portion of that through the transfer of wealth to the next generation.
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