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.