Home Ownership Still the Dream for Millennials, Despite "Major Concern" over Housing Prices
Almost one third of millennials fear they'll never be able to afford a home of their own
The vast majority of millennial Canadians want to own their own home despite major concerns over the costs, according to new surveys done by BMO and CIBC. BMO found 76 per cent of Canadians aged 19 to 35 who rent plan to buy a home in the next five years, but many (29 per cent) are afraid they'll never be able to afford the down payment and monthly mortgage costs.
More than half of the millennials that took part in BMO's survey also said they’re having difficulty saving enough money for a home that will meet their needs. Many said they’re simply waiting for high housing prices to drop and are counting on family members to chip in on a down payment.
Most millennials told BMO they want to own a detached home, but the bank says that’s not an affordable option for many younger buyers.
“In the 1980s and 1990s, older homes on large suburban lots were affordable options for younger buyers. Now, those properties have become relatively scarce and attract premium prices, leaving condos and townhouses as the new ‘affordable’ options,” said Robert Kavcic, Senior Economist for BMO Capital Markets.
How difficult is it buy a house today?
Millennials across Canada expect to pay an average $350,000 on their first home and they expect they’ll have to make a down payment of roughly $53,000 to make it happen, according to BMO. That number jumps in hot housing markets like Vancouver and Toronto. Here’s a look at expectations across the country:
|Average Price & Down Payment Millennials Expect toSpend on First Home,*(as of March 2016)|
The average price of home in Canada sits much higher: $508,567 in March 2016, according to the Canadian Real Estate Association. But this number includes all types of properties, and also factors in Canada’s two hottest housing markets. Take Vancouver and Toronto out of the equation, and the average price of a home in Canada drops to $366,950. Not far from millennials’ expected costs.
“Home ownership means personal freedom”
The cost of buying a home in many Canadians cities may be at record-high levels, but that doesn’t mean the dream of home ownership is dead for younger people. According CIBC’s survey, 86 per cent of millennials aged18 to 34 say home ownership is important, even though 63 per cent rent or live with their parents.
“It’s a myth that millennials don’t want to own their own home. In fact our poll suggests that millennials place as much importance on being a homeowner as Canadians in other age groups,” said Barry Gollom, Vice President of Mortgages and Lending for CIBC.
“Home ownership is an important milestone to many, and that hasn’t changed even though it has become increasingly difficult to get into the market,” he said.
- Related Read: First Time Home Buyer, 8 First Time Home Expenses
CIBC has some tips for millennials. Here are some of the ways the bank says younger Canadians can realize their homeownership dreams:
- Start saving early. Every dollar matters and establishing an automatic savings plan is a great way to make sure you achieve your goals.
- Don’t rush into the market. Your home must be financially sustainable and you don’t want to be house poor, struggling to pay your mortgage.
- Two of the biggest factors that drive home prices are location and size. Part of an effective plan is knowing the trade-off you might have to make. Make sure your mortgage is portable so you can move your mortgage once you are ready to upgrade to a bigger home or new location.
"For many Canadians, home ownership means personal freedom. A solid financial plan that is unique to your goals will ensure financial freedom as well," added Gollom.