Millennials do not like owning homes
The vast majority of millennial homeowners plan to sell their homes in the short-run because of the high cost of maintaining a mortgage.
According to a CIBC/Angus Reid poll conducted recently, 81 percent of home-owning millennials don’t plan to keep their homes — 57 percent of this group say that rising interest rates will make it harder for them to meet their mortgage payments, and 36 percent actually feel that renting is the “better option”.
Mortgage rates in Canada have been at their lowest levels over the past eight years, fueling a sharp rise in demand for Canadian real estate. But with the economy slowly picking up, the Bank of Canada will eventually have to raise interest rates, adding to the burden of monthly mortgage payments.
Only 39 percent of Canadian millennials have actually taken advantage of low mortgage rates to purchase property. The CIBC survey shows that the remainder 61 percent of millennials either live with their parents or rent.
Entering the market was much easier about five to six years ago, especially in cities like Toronto. Real estate prices have skyrocketed in the last three years, pricing out the majority of average-earning millennials. In fact, 23 percent of millennials believe that they will never own a home, and a similar number — 29 percent — aren’t sure if home ownership is even in their future.
The average price of a one bedroom condominium in Toronto, a city with a disproportionately high number of millennials, hovers around the $400,000 mark. If you’re on a stable, salaried income, you’d probably qualify for a mortgage with a $20,000 down payment — indeed, it’s no easy feat to save up that amount of money in a city as expensive as Toronto. If you’re self-employed, you’re looking at a minimum downpayment of $40,000 to be eligible for a mortgage — it’s no wonder that most millennials end up renting.
Taking a look at Canadians homeowners in all age groups, the poll found that as many as two-thirds of those surveyed were reluctant to sell their homes because of the high cost of buying another home.
Despite warnings of a housing bubble, 54 percent of Canadians expect that home prices will continue to rise, a statistic that lends credence to the narrative that an “irrational exuberance” of sorts is driving the absurd home prices we’ve seen lately.
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