Millennials are the next generation of home buyers, but unfortunately, affordability continues to be a barrier to home ownership. This is particularly true in Toronto and areas in and around the Golden Horseshoe. It’s a topic that will be top-of-mind as Canadians go into the next election.
In fact, the Federal Government is set to release a pre-election budget in late March which is expected to have measures in place to increase housing affordability.
Some suggestions have been to increase mortgage duration from 25 years to 30 years in an effort to bring down the monthly costs, or to revise the mortgage stress test rules. This would effectively make it easier for a millennial buyer to make a mortgage payment.
However, the drawback to this is that the approach would stimulate demand, inflate prices and cause further issues. Affordability and housing is a complex issue. The land is a commodity that is priced based on demand, and so builders find themselves with rising costs: land, materials and labour.
According to CMHC – Millennials will make up the next generation of homeowners, so there is pressure to ensure affordability in the future. A whole generation ‘opting-out’ of homeownership is not desirable in the least. Additionally, rental costs continue to climb making purchasing a home look good to those who are already putting a large chunk of their paycheque into living expenses.
What is needed, then? Increase supply to meet the growing demands and to provide choice and alternative options. This can be done in two ways:
- Reduce or eliminate red tape and barriers to bringing new housing projects to the market; and
- Increase the range of options available to those wanting to purchase housing
For 2019 and beyond, we expect further tightening of supply in major Canadian cities, however improving things such as transit from outlying areas will be of utmost importance in providing alternatives. This means faster routes with more frequency, more affordable rates, and incentives to make mass transit the better option for commuters into cities.
So what can a Millennial Homebuyer do today?
Just because a home isn’t in your immediate plans does not mean that this will always be so. Talk to your bank representative or financial advisor about ways that you can save or invest that will help put you in a better position in a few years. They can help you set realistic goals that are attainable.
If you have your eye on a new home or specific development, we recommend registering early and following the builder’s latest updates so that you can be prepared to buy when it’s time to launch. Getting in early means locking in at lower prices since they typically rise as projects begin to break ground.
Home ownership is more than just a dream of increasing personal wealth, it’s a matter of security. It means that your home will always be there: a place to make memories, grow a family, and to realize your personal goals and satisfaction. It’s an important milestone in life and one no Canadian should have to opt out of.