Rising house prices across Canada have made many millennials think twice about homeownership. Many instead choose to rent a property with friends or family. In fact, 44 percent of Canadian millennials believe that homeownership in the near future is a “pipe dream”, according to a survey by KPMG. Is this true? What are the factors affecting their decision to delay purchasing their first home?
The ‘Bad’ for Millennials Looking to Buy a Home
- 72 percent of millennials want to own a home
- 46 percent of millennials who own a home received a financial gift from parents
- 38 percent think their house won’t be as valuable in the future
*According to the survey by KPMG
Compared to past generations, millennials are facing different challenges in building wealth, said a report by Statistics Canada in 2019. Many young people are trying to save for a down payment while also paying; student loans, monthly rent, and car insurance. When all of these factors are combined, having enough money for a down payment may seem grim.
According to a study done by the non-profit group, Generation Squeeze, saving 20 percent for a down payment will take about 13 years for first-time home buyers. That number is even higher for the greater Toronto area, at 21 years, and 29 years in Metro Vancouver.
The ‘Good’ For Millenials Looking To Buy A Home
While some millennials don’t think that homeownership will be possible for them, others are optimistic. Many young couples are excited about the prospect of owning a home, especially since, in some areas, mortgage rates have hit a near-record low. They mostly look forward to gaining financial independence and view real estate as an ideal investment.
Realtors are noting a record number of transactions by millennials this year. Even more, nearly one in five Canadians aged 18-34 say the pandemic has sped up their decision to purchase a home or invest in a property. Some of the ways they are able to afford a home is by relocating to the suburbs and renting out a portion of their property. Of course, some cash from mom and dad also helps them afford the downpayment.
How To Start Saving For Your First Home
The key to homeownership for younger buyers will be building savings. One option to start saving is with a registered retirement savings plan (RRSP). If you are a young buyer with a good income, you could arrange a large RRSP loan to cover years of unused contribution room. From there, the assets can be withdrawn from your RRSP. If you are a couple looking to buy a home, you could both take advantage of each other’s RRSP’s and each take out $35,000. In total, you will have $75,000 which is a healthy start for a down payment. Weddings are also large sources for savings. Couples could request money instead of wedding gifts and use that money for their down payment.
There’s no doubt that millennials have it harder when it comes to homeownership, especially if they’re looking to settle down in urban areas. If you’re looking to purchase your first home, don’t be discouraged. Start saving as soon as possible and use all of the resources available to you. If you need more advice about what the best course of action is, consider hiring a real estate agent.
Christine Brayford is a real estate agent specializing in the Barrie, Simcoe County, and the Greater Toronto Area. She can help you navigate the world of residential real estate whether you are new or experienced.