Survey: Millennials want to own property despite homeownership challenges
Peak millennials want to purchase homes, despite the economic difficulty in today’s market.
According to the Royal LePage Peak Millennial Survey released today, high home values and job uncertainty means different strategies and priorities for “peak millennials,” a term used to describe the cohort of the largest millennial demographic and the impact of their potential purchasing power.
And with peak millennials soon reaching their late 20s, it’s projected that the number of people between 25 and 30 years-old will increase by 17% by 2021, changing the homeownership landscape.
“Whether they choose to buy or rent, peak millennials will inevitably shape the housing market due to their sheer volume,” said Phil Soper, president and CEO, Royal LePage in a release. “We expect demand from this demographic to put additional pressure on entry-level housing and investment properties being used to supplement the limited inventory of purpose-built rental buildings.”
While millennials want to be homeowners, they will be facing several challenges on the path to ownership. The Royal LePage survey, conducted by Leger, found that 87% of Canadians aged 25 to 30 believe homeownership is a good investment. And while 69% want to own a home in the next five years, only 57% of those surveyed believe they will actually be able to afford one.
“Facing challenges their baby-boomer parents never encountered, peak millennials are confronted with significant obstacles that vary depending on where they live,” said Soper.
Even though finding employment in the large cities like Toronto and Vancouver is easy compared to other cities, buyers in these areas face limited inventory, according to Soper. And where prices are affordable for homes, there are limited jobs.
While 50% of peak millennials choose to rent, 14% are living at home as a strategy to save for a future home. And of those surveyed, 35% already own a home. When looking to purchase a property, 75% of peak millennials said they would use their personal savings for a down payment, with 37% seeking out alternative means of funding, like financial support from their families.
And even with assistance, it’s not easy to get into the market. More than half (64%) of millennials believe that homes in their area are unaffordable, with a significant proportion of respondents in both British Columbia (83%) and Ontario (72%) saying that prices are simply too high. Of those that do not believe they will be able to own a home in the next five years, Royal Lepage’s survey says 69% stated that they cannot afford a home in their region or the type of home they want, while a quarter (24%) are unable to qualify for a mortgage.
So in addition to the high home values and limited inventory, millennials also struggle with mortgage stresses, which push them to remain in the rental market or to try to move into more affordable regions outside of the city centres. In fact, nearly half (49%) of the peak millennials surveyed believed that “the federal government’s new mortgage regulations have impacted the types of property that they can afford, effectively pushing them into highly competitive, lower-priced market segments.”
Millennials are then forced to look at purchasing condos, rather than the preferred detached home that 61% prefer but only 36% feel like they could actually afford. As well, more than half (52%) of those surveyed said they would look into the suburbs for property that is more affordable.
“While peak millennials are becoming increasingly inventive in their quest for homeownership, careful attention to urban planning could help to alleviate some of their constraints,” said Soper. “By focusing on vertical living, and developing larger, affordable condominiums in urban markets, supply limitations would ease, providing long-term, appealing solutions to young buyers in search of affordable property.”
In the quest for home ownership, 53% of peak millennials said they are willing to spend up to $350,000 for a home in Canada. But with 58% having less than $69,000 in annual income, and only 34% having sufficient downpayment of 20% to qualify for a mortgage in this price range, the reality of homeownership is daunting and difficult.
So what does $350,000 get a peak millennial across the country?
According to Royal LePage, with a budget of $350,000, purchasers in British Columbia can typically find a 2.5 bedroom, 1.5 bathroom bungalow with 1,187 sq. ft. of living space. But in Greater Vancouver, this budget will generally get you an 879 sq. ft. condominium with 2.0 bedrooms and 1.5 bathrooms.
On average, a $350,000 budget within the province generally nets a 3.0 bedroom, 2.0 bathroom two-storey home with 1,528 sq. ft. of living space. But when buyers head to the big city, the size of the home decreases. In Calgary, the budget offers purchasers a fairly comparable 1,458 sq. ft. two-storey home with 2.5 bedrooms and 2.0 bathrooms.
Similarly in Ontario, prospective buyers with $350,000 can typically purchase a 2.5 bedroom, 2.0 bathroom two-storey property with 1,338 sq. ft. of living space. However, in the Greater Toronto Area, purchasers often receive significantly less for $350,000, netting a 910 sq. ft. condominium with 2.0 bedrooms and 1.5 bathrooms on average.
Quebec has a better deal for peak millennials. The $350,000 budget can get a 1,522 sq. ft. bungalow with 3.0 bedrooms and 1.5 bathrooms on average. And even when venturing into the Greater Montreal Area with purchasers typically netting a 3.0 bedroom, 1.5 bathroom bungalow with 1,427 sq. ft. of living space.
This is probably where peak millennials can get the best bang for their buck. A $350,000 budget here gets you a 1,934 sq. ft. two-storey home with 3.0 bedrooms and 2.5 bathrooms. Of the regions studied within Atlantic Canada, Fredericton offered prospective homeowners the most value for their money, producing a 2,568 sq. ft., 4.0 bedroom, 2.5 bathroom two-storey home on average. Meanwhile, in St. John’s typically the budget can provide purchasers with a 2.0 bedroom, 2.5 bathroom two-storey home with 1,767 sq. ft. of living space.
Looks like when it comes to real estate, east coast is the best coast.