Should I stay or should I own: Half of Canadian millennials say they'd have to leave the city they love to buy a home
Author: Rosa Saba
Source: The Toronto Star
Canadian millennials who hope to one day own a home say they’re faced with a difficult decision: Stay in the city they love, or leave if they want to realize that dream.
A new survey from Royal LePage conducted by Leger found that almost two thirds of Canadian millennials who don’t already own a home are confident they will one day, but 52 per cent say they would have to relocate to do so.
Despite that gloomy outlook, the millennial generation could end up with a higher rate of home ownership than baby boomers, according to Phil Soper, CEO of Royal LePage.
Soper said millennial home ownership has been trending upwards, and based on that as well as the relative confidence the survey showed about future ownership, he thinks millennials could end up owning homes at a higher rate than their predecessors, the boomers.
“This generation could end up having the highest rate of home ownership in Canadian history,” he said.
When it comes to relocating, Torontonians are attached to their city, said Soper — four in five millennials here say they will stay if the cost of living allows it. However, 63 percent say they think they will have to relocate to own a home, compared with 55 per cent in Montreal.
46 percent of millennials do not believe their pay will increase enough for them to buy a home in their current location.
“It is a tough decision,” said Soper.
The survey of 2,003 Canadian millennials aged 26-41 was completed in June. It found that one quarter of non-homeowner millennials do not believe they will ever own a home.
According to the survey, 57 percent of Canadian millennials already own a home, with a higher portion owning a home among those 35 and older.
51 percent of Canadian millennials plan to buy a home in the next five years, and for almost half of those, it will be their first home.
Around 73 percent of baby boomers currently own their homes, which is the highest rate of any generation, said Soper (the overall rate in Canada is more than 68 percent).
If millennials’ intentions bear out, they could surpass that, he said.
The percentage of millennials who foresee home ownership in their future is higher in cities like Montreal and Calgary than in Toronto and Vancouver, which isn’t surprising, said Soper.
“This generation of Torontonians overwhelmingly desires to be homeowners, and many of them are willing to make concessions in order to get on the real estate ladder,” said Tom Storey, a Toronto-based sales representative with Royal LePage, in Wednesday’s news release.
“Ideally, they would be able to work fully remotely and have the option to purchase wherever necessary to find a property within their price range. For those who have to be close to their place of work in the city, settling for a small condo is a common alternative.”
According to the release, young would-be buyers continue to face significant challenges to entry, as the rising cost of borrowing has become a barrier even as the market has cooled. But that shouldn’t deter would-be home buyers from purchasing altogether, Storey said in the release.
“With interest rates rising, even if your monthly payments are similar today to what they would have been in February or March on a more expensive property, your down payment is now significantly lower,” he said.
“In the long run, is it more beneficial to purchase at a lower sticker price than lower interest rates, which will be renewed every three to five years.”
Sales activity and prices have been going down for months as the Bank of Canada proceeds with a series of oversized rate hikes to try to curb skyrocketing inflation.
In Toronto, home resales were down around 47 percent in July compared with the previous year, and home prices increased by just 0.1 per cent in July compared with June.
Some experts have even been predicting a massive price drop in the housing market by as much as 20 percent.
The cooling housing market will likely help some millennials buy sooner, said Soper. When markets correct, such as it did after the financial crisis, buyers and sellers tend to adopt a holding pattern, he said, but the first people to start buying again are first-time homeowners.
That’s because they don’t have a horse — or house — in the game, he said, and can only benefit from lower house prices.
Soper said the onset of this trend is beginning to show.
“We’ll see more in the fall, and by the spring of 2023, my sense is we’ll have a real surge in first-time home buyers,” he said.