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Real Estate Industry Pushing for More Affordable Housing for Millennials
The Housing Summit at the Toronto Region Board of Trade took place in early October to remind Ontario Premier Doug Ford about how to fix housing supply issues.
High on the list? Affordable housing for millennials.
The Ontario Real Estate Association, the Ontario Home Builders’ Association, and the Federation of Rental-Housing Providers of Ontario called on Ford to make homeownership more attainable for the millennial (25-to-34-year-olds) demographic.
The Current State of the Millennial Market
While there has been a lot in the news lately about millennial spending habits and the factors that prohibit them from buying a home, it’s not quite as simple as “stop buying avocado toast.”
“You have to speed up the approvals process,” OREA CEO Tim Hudak told MortgageBrokerNews.ca.
“It takes up to 10 years to get a new development done and every month of delay means increased costs to the consumer at the end of the day. We’ve also suggested that the provincial government make more investment in rail—more subways, more GOs, more LRTs.”
The Financial Post found that a Burlington house that was bought for $260,000 in 2000 is now worth upwards of $1 million.
“The fact is, there’s been a massive transformation in terms of how much more work young people have to do to get so much less,” Paul Kershaw, a professor at University of British Columbia’s School of Population and Public Health in Vancouver and founder of Generation Squeeze, a non-profit organization that advocates for young adults, told The Financial Post.
Kershaw found that in 1976, the price of an average Canadian home was $213,030 and the median full-time earnings for a 25-to-34-year-old were $54,700 (numbers adjusted for inflation).
In 2017, the average home price was $510,179 and the median full-time income was $49,800.
And it’s not just buying the house that is more expensive — it’s staying in it, too.
According to Kershaw, in 1976, it took five months of full-time work to pay the annual mortgage on an average-priced Canadian home, after saving 20% as a down payment.
In 2017, it took six months nationally with variations by province — six-and-a-half months in Ontario and eight months in B.C.
New Mortgage Regulations
Measures such as the foreign buyers’ tax and new mortgage regulations have attempted to cool the Canadian housing market. But in doing so many are saying that it has pushed the millennial generation out.
For example, prior to the new mortgage rules, older homebuyers might have purchased a more expensive detached home. But now with interest rate increases and tighter regulations, they are opting for more affordable choices: condominiums, townhouses, semi-detached homes, and the like. But these were the very homes that millennials would have used as an entry point into the market.
With less supply, it is tougher for millennials to break in at all.
For millennials who choose to rent while they save up money for a down payment, that is getting more expensive, too. During the first quarter of 2018, the average Toronto rent was $2,206.
New stress testing regulations are also making it more difficult. Even if millennials have enough money for a down payment (or are given some of the money from family), they still need to qualify at the stress tested mortgage rate.
Higher mortgage rates also mean higher mortgage payments, and then homebuyers have to qualify at an even higher stress-tested rate. Plus, in today’s $500,000 does not buy very much home, and anything over $500,000 means that homebuyers will need a 20% down payment.
As millennials have been finding it increasingly difficult to break into the mortgage market, some are opting for non-traditional living arrangements, such as:
- The tiny home trend – living in spaces of 100 to 500 sq. ft.
- Renovating school buses or vans to live in.
- Performing more home renovations — i.e. a fixer upper.
- Co-ownership. Friends are choosing to purchase homes together.
- Having an income property, whether that income is through renting or a service like AirBnB.
What This Means to You
Beyond advocating for regulatory changes, as OREA and other organizations are doing, there may be opportunity in the market.
- Millennials may be open to more alternative living scenarios. If you have a property that is outside of the box or a hard sell due to size or location, this could be an opportunity.
- Millennials may also be more likely to move to less populated areas with more affordable home prices and take a longer commute, especially if they have the ability to work remotely. For example, some are choosing to move to Hamilton or Niagara Falls and commute to Toronto two days per week.
- You could also suggest co-ownership, or even market products towards it.
- Use property data to identify millennial-driven neighbourhoods. For instance, with Purview’s tools you could search by demographic and identify where other 25-to-34-year-olds are buying and use the information in your own business.
While the housing market may be making it more difficult for younger generations to break in, it doesn’t have to be impossible.
At Purview, our property tools can help you identify up-and-coming neighbourhoods, comparable sales, property value before the assessment, and more.
Get in touch today. Call 1-855-787-8439 or visit www.purview.ca.« Back to Blog