Young and well-educated millennials earn more than the typical Canadian employee but have considerably lower homeownership rates when compared to their parents at the same age. So why is this generation of young professionals struggling to get a foothold on the property market?
Besides the fact that the average home price 20 years ago was 70K and today it’s 277K, there isn't a definitive reason why millennials can't take that first step into home ownership. It's a complex storm of societal challenges, housing market trends, and, of course, financial reasons that have made it so difficult for potential young homebuyers. Approximately 41% of Canada’s home buying population are people between the ages of 18-34 and the average purchase price for first time home buyers in Canada is between $251,000-$333,000.
Although it's not all doom and gloom, here are some of the issue’s millennials are facing when trying to enter the housing market:
Needing a Down Payment
In Regina, the average price of a home here is between $275,000-$300,000. The minimum down payment requirement is 5%, which is approximately $15,000. Add an additional 1.5% for closing costs, that’s another $4,500. So the average home buyer needs approximately 20K to buy a home which doesn’t factor in any upgrades or improvements that may need to be done to the house after purchase.
According to this report by Mortgage Pros Canada, only 18% of home buyers were gifted their down payment.
Actually Being Able To Qualify For A Mortgage
Canadian home buyers have recently been imposed with a new “stress test.” The stress test forces buyers to qualify at a huge 2 rate points higher than the actual rate they will receive, stretching their financial ability. Under the new stress test rules, a HUGE 18% of Canadian home buyers were either unable to buy a home altogether or had to buy in a lesser price range.
Sluggish Wage Increases
Saskatchewan has seen very slow wage increases. According to Workopolis wages only increased by 3.1% in 2017, making the average income of a Saskatchewan resident $52,728. This is a pretty good salary, without any debt this income can probably get you into a home under $300,000.
Paying off Student Loans
Underlying the above issues is the fact that young adults are graduating university with more student debt than ever before, which goes a long way to explain why nearly 30 percent of 20-year-olds with college degrees are still living at home with the folks.
Most millennials want to buy a home so they can move out of the rental spiral.
The top 3 concerns for Millennials when buying a home are:
- Price, budget & finances
- Not being able to find a home they like
- Location
These concerns are universal across all home buyer demographics as far as I’m concerned, most people want to live in a home they BOTH love and can afford. Yes, there are some hurdles millennials have to get over in order to buy.
Even with these hurdles, so many first time homeowners are getting into the housing market with success right now.
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Kelsey Smith Is Regina’s Choice
Choosing the right Realtor® is key to ensure a positive and successful real estate transaction. Kelsey Smith promises to deliver the education and time necessary to buy or sell your Regina home. Call 1-306-552-7047 and rest easy knowing you have made the right choice.