The millennial generation has come of age, and they now comprise a major part of the employment and real estate buying markets, both in Toronto and across Canada. With high levels of confidence in the economy and the Canadian job outlook, millennials are enthusiastic about buying real estate. However, they often need help to do so, leaving many millennials in search of creative ways to buy into Toronto’s booming residential real estate market.
According to an April 2018 report in Forbes, 82 percent of Canadian millennials who do not currently own homes are looking to buy real estate in the next five years. However, they face some significant hurdles. New mortgage stress test rules went into effect in January 2018, making it more challenging for millennials to realize their home ownership dreams. They are just now entering the workforce in large numbers, and so-called “peak millennials” born between 1987 and 1993 have average annual earnings of just over $38,000.
Given their average income levels, many millennials need help to realize their home ownership dreams. Young couples in two-income households are having an easier time coming up with the money to purchase a home, but even more commonly, millennials are turning to the baby boomer generation for financial assistance.
One-third of Canadian baby boomers have indicated that they plan to transfer wealth, or have already transferred wealth, to millennial children or grandchildren. These so-called “living inheritances” are helping young home buyers purchase real estate in pricier areas, like Toronto.
All told, 37 percent of Canadian millennial homeowners got some financial help from their parents. One common way around the new mortgage stress-test rules is for parents to purchase homes on the behalves of their children, but claim only 1 percent ownership on the home title.
A recent Genworth Canada study tracked trends among first-time home buyers in several major Canadian cities, finding that nearly 40 percent of Toronto’s newest homeowners elected to purchase condos. Condominium suites tend to be priced at more attainable levels, and they also tend to easier and more convenient for younger owners to maintain. Detached homes accounted for 28 percent of Toronto’s first-time purchases, while townhouses came in third at 19 percent.
In Toronto, many millennials are also looking to act sooner rather than later, with interest rates appearing set to follow an upward trajectory. Between rapidly appreciating property values and the looming prospect of costlier mortgages, a growing contingency of young buyers believe they’ll be priced out of the market if they don’t purchase a home soon.
A 2018 Financial Post poll found that 61 percent of millennials are at least “somewhat concerned” about how rising interest rates will affect their home ownership goals. As such, many Toronto realtors are reporting that a healthy chunk of their business is now coming from younger buyers, with some even saying that up to three in five of their new clients are members of the millennial generation.
About Jethro Seymour
Jethro Seymour, one of the Top Davisville Village Real Estate Brokers at Royal LePage RES Ltd. Jethro Seymour is a midtown Toronto residential specialist with over 20 years of sales experience in real estate, marketing, construction and publishing. He has helped many families find homes in Toronto ’s great neighbourhoods, and has extensive knowledge of local markets, new home construction, resale home sales, and the condo market. Living in midtown Toronto, Jethro previews many of the homes that come to market for his clients and inventory knowledge. Jethro specializes in Midtown, Davisville Village and Leaside neighbourhoods. For more information, call Jethro Seymour, Broker.