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Homeownership: Challenges Millennials Face as First Time Buyers

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Common problems and difficulties faced by millenials aged 35 and below when purchasing their first home.

Published in: Real Estate
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Homeownership: Challenges Millennials Face as First Time Buyers

  1. 1. Homeownership: Challenges Millennials Face as First Time Buyers You might be surprised to learn that home ownership among millennials aged 35 and under is actually at a three-decade high, surpassing European cities like Paris and Berlin according to a recent RBC report. The current Canadian home ownership rate among that age group is at 43.1% with generally expensive cities Vancouver and Toronto sitting at 35.9% and 38.9 % respectively. With statistics in their favor, why then do many millennials find it difficult to enter the housing market and maintain ownership? The experts point to affordability and low supply as the culprit. According to reports, the average salaries for 18 to 35-year-olds have remained stagnant for nearly four decades, while every other age group (Gen X and Baby Boomers) has seen steady gains in their paychecks. Less access to quality benefits through employers in the changing economy are also a hindrance, giving older generations another advantage. The market outlook spells further doubt for millennials who have yet to enter the market, with five-year projections showing large Canadian cities will see increases in housing prices of more than five percent. Demand is expected to remain high while interest rates, amortization periods and mortgage stress tests are creating uncertainty, threatening to keep millennials in the rental market for the foreseeable future. President and CEO of the Building Industry and Land Development Association David Wilkes says some changes to those amortization periods and the mortgage stress tests could be a likely move from the federal government. From a political standpoint, the question around affordable supply will need to be addressed at all levels of government. Part of the problem comes down to timing as David Macdonald, senior economist at the Canadian Centre for Policy Alternatives (CCPA), believes. His research concluded that people who have benefited most from rising home prices in recent years are those who bought property before the late 1990s. That group is now selling their properties at drastically higher prices than what they paid, leaving the younger generation scrambling for affordable housing solutions. Millennials also face hardships when coming up with a sizeable downpayment, partially due to their socioeconomic status. Oftentimes, they are just graduating from university and have student loan payments to consider. Further, most entry-level jobs are low paying and are inadequate for high priced mortgages. As housing trends become more favorable, it will be interesting to find out if millennials, in particular, will find buying their first home to become more attainable.

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