The Reality of the Millennial Homeownership Dream
HSBC survey provides insight into how millennials feel about buying, renting and owning their own home.
If you're a millennial in Canada, or the parent of one, a recent HSBC survey suggests that the dream of homeownership isn't dead, it just requires some help—and work—to bring the aspiration of buying a home to life.
"This study challenges the myth that the homeownership dream is dead for millennials—be it in Canada or around the world," said Larry Tomei, Executive Vice President and Head of Retail Banking and Wealth Management, HSBC Bank Canada. "In fact, more than three in 10 Canadian millennials already own their home, and more than eight in 10 are planning to do so in the next five years."
According to the survey, 34 per cent of Canadian millennials have jumped into the housing market and purchased a home. However, they did not go it alone: Mom and Dad had a hand in helping them buy the property. Thirty-seven per cent of millennial homeowners borrowed from their parents, and 21 per cent moved back home to save up enough for a down payment.
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82 per cent of millennials who don't already own, plan to in the next five years
While parents can, and often do, help their adult children with their first purchase, the millennials who plan to get a mortgage and buy a home in the coming years know they'll have to make sacrifices to afford it—both before and after the purchase. Close to six in 10 (59 per cent) of Canadian millennials would consider spending less on leisure activities, 37 per cent would consider buying a smaller home than they ideally would like, and almost a third (30 per cent) would delay having children, according to the HSBC survey.
Yet, while willing to make sacrifices, the millennials surveyed struggled with budgeting. Almost three in 10 (27 per cent) said they have not planned a budget yet and a further 53 per cent said they only had an approximate budget in mind.
"Despite a strong desire to take the homeownership journey, the findings also suggest that Canadian millennials face some significant barriers, with more than two thirds (70%) saying they haven't saved enough for a deposit nor do they have a firm budget in mind," added Tomei.
To help Canadian millennials get their house in order, HSBC offers the following tips:
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- Start planning and saving early.
While many people focus on just saving up for the down payment, you'll also need to save up for the closing costs. According to the Canadian Mortgage and Housing Corporation (CMHC), closing costs will generally run about 1.5 per cent to 4 per cent of your purchase price and will typically cover the legal fees, land transfer taxes and other costs associated with the purchase.
- Budget beyond the purchase price.
Personal home touches, like furniture, window coverings and a fresh coat of paint, will turn your house into a home. However, these all come with a cost and you'll want to factor them into your home purchase budget.
- Look for ways to make it work.
In addition to cutting back on your day-to-day spending to save more, what other ways can you make your dream a reality? Be open to the possibility of buying a smaller home, townhouse or condo, or buying in a different, less expensive, neighbourhood. Perhaps, once you've purchased your home, you could even be open to renting out a portion of it to help pay the mortgage.
- Get a full view of your finances.
You'll have to think of your mortgage as part of your long-term financial plan, not as a one-off transaction. After all, you're going to have a mortgage for years, even decades to come. Create a budget to know where your money comes in and goes out, and seek professional financial advice to ensure you stay on track.