A new report shows that 82 per cent of millennials in Canada expect to buy their first home in the next five years, despite facing significant challenges.
The independent research study was commissioned by HSBC and based on feedback from 9,000 people from across the globe, including 1,000 from Canada.
Canada is sixth on the list of millennial home ownership, at 34 per cent, following the U.S., according to the report. But the report shows the percentage of millennials that intend to buy a home in the near future is more than double that at 82 per cent.
“Whereas there might be a perception out there that millennials don’t want to own houses, the report tells us otherwise, that they do want to and plan to,” said Aurora Bonin, senior media relations manager for HSBC. “The data suggests millennials are knowledgeable about the challenges they face, but they are optimistic and willing to make sacrifices, such as forgoing travel or buying a smaller place.”
Millennials aren’t the most proactive budgeters, according to the report. Twenty-seven per cent of millennial non-owners who intend to buy a home in the next two years have no overall budget, and 53 per cent have only an approximate budget. Additionally, 42 per cent of millennials in Canada who have bought a home in the last two years ended up overspending.
“As cliche as it sounds, the importance of budgeting is something a lot of people don’t quite have a grasp on. Managing your budget at an earlier age will set you up for the rest of your life,” Bonin said. “Understanding your credit and credit score is important because decisions you make now will impact your buying power and ability down the road. If you don’t pay your credit card for three months, that sticks with you for many years.”
It doesn’t help that Canada’s house prices have grown nearly three times that of household income since 2000, according to a 2016 Frontier Centre for Public Policy report.
Just last year, Vancouver was reported to have the worst affordability at any time in Canadian history, with Toronto coming second, according to an RBC report on housing affordability. The average price of a detached home in Toronto costs around $1.5 million, according to recent information from the Toronto Real Estate Board.
Ahmed Elchamaa, who lives in Ottawa and works for the federal government, said he had a personal goal to own a house by the time he reached 25—he managed to do so a week before his birthday. But he said there were definitely a lot of challenges.
“The banks want to make sure you can pay off the mortgage, so if you don’t have a full-time, permanent job with steady income, they are less likely to give you one. A lot of people my age don’t have that kind of job security, so it’s more difficult to secure a mortgage,” Elchamaa said.
He said he was “one of the lucky ones,” since he had a full time job after finishing university, and lived with his parents to save money. But because the housing market is difficult and homes are becoming more and more expensive, even the five per cent he put down ended up being a lot of money, he said.
“It forced me to look at houses in cheaper areas and houses that needed a lot of work,” he said. He is currently doing a lot of renovations, and plans to rent out a room on Airbnb to help cover the costs.
Nathanael Lauster, an associate professor at the University of British Columbia who specializes in real estate and urban planning, advises against home ownership altogether. He said there are barriers to becoming a homeowner that favour wealthy people, who are often older than millennials.
“The more important issue is actually maintaining viable and robust alternatives to home ownership. These include ensuring renters have lots of options and rights, but also extend to encouraging co-operatives and related forms of collective ownership. The more different housing options we provide people, the better,” Lauster said.
– Photo provided.
