Some millennials definitely want to buy a home but the reality is that housing affordability is a source of concern for both, homebuyers and policy makers.
Why Millennials Are Reluctant to Buy a House?
Today demand exceeds supply and this is the reason why housing prices keep going up. In light of this fact, more than 50 percent of millennials believe that they will never be able to buy a home, whether a detached or semi-detached house. Many of them simply can’t afford it, especially in Toronto and other big cities. What is more, according to a recent survey, about 63 percent of owners plan on selling their homes because they find it increasingly difficult to carry a mortgage. Some 57 percent of respondents believe that rising interest rates add to the cost of owning a home, and they find it difficult to keep up with payments. This makes renting a property a more attractive option for many residents. Figures prove this – today some 42 percent of millennials rent while 38 percent own a house. Some Canadians plan on selling their home to downgrade as well.
Тhe Angus Reid survey shed light on perceptions and beliefs about price movements. Only 40 percent of respondents were positive about home prices within a 5-year period. This explains why millennials are reluctant to buy a home. And those who plan on buying a house or a condo have important decisions to make. Home prices are high in neighborhoods that are attractive and safe to live. It is difficult to find an affordable home in a good neighborhood, however, which means that many millennials either choose to rent or find it hard to live within their budget.
Contributing Factors: College Loans and Low-Paid Jobs
There are factors that magnify the problem. Many college students borrow heavily to pay for tuition and cover school-related expenses such as rent or board, textbooks, supplies, and so on. This means that many students are forced to borrow heavily, whether in the form of a student loan, personal loan, credit card, etc. College graduates often have one or more loans or cards to repay and to make things worse, some young people land low-paid jobs. The problem is that a low-paid job makes it more difficult to qualify for a low-cost mortgage loan. Many banks are actually reluctant to offer mortgage financing to graduates who are knee-deep in debt and have a low income. To add to the problem, the wages in some industries and sectors have been stagnant over the last couple of years, and many young Canadians worry that they may end up in a dead-end, low-paid job. With interest rates on the rise, this means that they would find it increasingly difficult to make mortgage payments in a timely manner.
Is Home Ownership an Attractive Option for Millennials?
Some share the opinion that home ownership is not an attractive option for young people who are more flexible and mobile than the old generation. Home ownership security is not a priority for many millennials. Young people travel more than the old generation and often change jobs. This means that many of them relocate every couple of years and the purchase of a high-priced property is not an attractive option. On the other hand, there are housing markets in Canada that are millennial-friendly, and some young people choose to relocate and buy an affordable home. The average price for a house in Atlantic Canada is around $254,000, and the average down payment stands at around $34,000. This means that borrowers have a monthly payment of about $995. In Quebec, the average home price stands at around $235,000, and the monthly mortgage payment is $927. Home prices for condos, bungalows, and two-story homes are affordable in places like Montreal Southshore, Montreal Northshore, Laval, Gatineau, and elsewhere. Thinking small and buying a small condo or a tiny house is also a good way to find an affordable alternative for those who prefer to live in Toronto. Some people choose to rent a small house first to see whether they feel comfortable and then buy a small-size condo or house.
More and more young people in Canada have begun to share former hotels and mansions, making community homes increasingly popular. This is one alternative to high-priced homes in Toronto and the GTA. On one side, these millennials are mortgage debt-free, and it is easier for them to relocate to a region where wages are higher and unemployment rates lower. On the other side, people who choose to rent won’t build home equity, which is definitely an asset.
What Can Be Done?
It is true that local authorities and territorial governments have few tools to control the housing market. At the same time, there are some possible solutions so that more millennials and Canadians in general have the chance to buy affordable housing. To this end, it is important to build a good transport and transit infrastructure to encourage building and increase the housing supply. Target infrastructure is also an important component and requires local planning approvals. They allow builders to secure water supply, sewers, and other facilities. Improving and speeding up the approval process is one way to secure affordable housing. An important step to help millennials find low-cost homes is to change existing zoning laws. This is one way to deal with the current shortage of land and build more homes to increase supply so that property prices go down. A good way to encourage more homeowners to list their properties is to reduce the land transfer tax in Toronto. A high land transfer tax discourages people from listing and many of them prefer to make home improvements and renovations.
