In 2015, the United States’ Federal Reserve Bank of St. Louis released a report based on data collected from 40,000 households between 1989 and 2013. It found that home ownership – once the bedrock of the American Dream – had become an unaffordable option for many young people.
Source: http://www.thinkglink.com/2016/12/16/money-millennials-and-buying-homes/
“Buying a home too early,” the study reads, “is putting young families on a trajectory to be poorer than all previous generations. “ It further stated that “young Americans may be better off delaying their first home purchase.”
The picture is much the same north of the border: home ownership is a societal norm in Canada, and many young Canadians are either naturally drawn to the idea or feel an innate pressure to pursue it. But in a changing financial landscape, home ownership is increasingly becoming an unattainable goal.
Luckily there are options, and more Canadian millennials are seeing the value in maintaining rental apartments, condos, or houses.
Freedom & Affordability
According to figures released by the Canadian Real Estate Association on April 18, 2017, the average price of a home in Canada climbed to over $548,500 last month, an 8.2% spike over last year. In some of the country’s major economic centres, prices are even higher. This presents a major dilemma for Canadian millennials, as cities like Toronto, Vancouver and Winnipeg are where jobs reside.
In these markets, renting is an excellent alternative to home ownership; not only is it more affordable, it also offers much more freedom. Millennials working in downtown Toronto or Winnipeg are unlikely to be able to purchase a home near work, but rental apartments are plentiful. Renting provides the freedom to live where you want, and to look for another place when you’re ready to move on
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Financial future
In February, Royal Bank of Canada chief executive Dave McKay voiced his concern about the possibility of a housing market correction, especially in Toronto. “You’re seeing 20 per cent house price growth in a market where you shouldn’t see that much,” he said. “That’s concerning, that’s not sustainable.”
More and more, young Canadians are turning away from a volatile and inaccessible housing market. With the threat of a market crash on the horizon and price of entry to the market so high, apartment rentals have in some situations become the more prudent choice. Sky-high mortgages make it difficult to save money for the future and lead to dangerously undiversified financial portfolios. Maintaining a rental property, setting up a stringent savings program, and developing a reasonable investment portfolio can yield similar, and in some cases superior returns to investing in a home.
There is no universal answer to the question of renting vs. buying: every potential homeowner has different desires, needs, and resources. As housing prices accelerate and wages stay relatively flat, rental apartments are shedding their unearned negative reputation and are emerging as a viable housing option for Canadian millennials.
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