The millennial generation is different from the generations that came before them in many ways. Their outlook on life, financial habits, and even social interactions draw a stark contrast between them and their predecessors.
Millennials don't always view traditional rites of passage, such as marriage and family, in the same way. Most of their social interactions happen on their mobile phones. Even their financial habits, often dictated by student debt, are different and that has an impact on the real estate market.
As millennials reach the age where they should be thinking about owning property, the real estate market needs to learn more about how this generation thinks, what their needs are, and how to meet them. This starts by understanding the preferences that millennials have when it comes to real estate.
40% OF MILLENNIALS PLAN TO PURCHASE REAL ESTATE IN THE NEXT TWO YEARS
The millennial generation has been impacted by the wild housing markets in the Toronto area over the past couple of years. Those with experience in the Canadian real estate industry likely remember how much the property prices changed in 2017.
Then, in 2018, new mortgage qualification guidelines were introduced - a.k.a. the stress test. This reduced the size of the mortgage that borrowers could qualify for. Which means that those interested in buying a home would have to either purchase a less expensive home or put down a larger down payment. This clearly impacts the millennial generation who don't necessarily have the money to fund a large down payment.
Despite these changes, Canadian millennials are still hanging on to the dream of one day owning a home. A recent survey was conducted by RBC showed that close to four out of every ten millennials expected to purchase a home within the next two years. This number is significantly higher than the overall rate, showing that 25% of Canadians, in general, expect to buy a home in the next two years. Another survey conducted by Genworth Canada in May of 2018 showed that the majority of millennials (60%) have already accomplished their goal of buying a home. Furthermore, 30% of millennials surveyed indicated that they purchased a home in the past two years. In some cases, this home wasn't even their first. This number dwarfs the 9% of non-millennials who purchased a home in the past two years and shows that not only are millennials buying a property but they are buying a property at a higher rate than non-millennials.
So what's the trend here? It's evident that most millennials in Canada prefer to buy real estate. Some have already accomplished this goal but more are looking to do so in the future. In order to attract this generation to make such sizeable investment, it's important to think about why millennials are interested in buying a home.
WHY DO MILLENNIALS BUY HOMES?
In Ontario, millennials are looking at real estate as an investment. Even though many millennials are renting for longer periods of time before buying, the surveys above indicate that millennials still want to buy a home. Because the property values in Toronto are going up, many millennials see purchasing real estate in this area as an investment.
The National Bank of Canada has a house price index that tracks the average property values across the country. This index shows that the price of Toronto real estate is increasing gradually. Therefore, this presents millennials with an opportunity to not only buy property but also invest in something that will increase in value. As more millennials approach the age where they are thinking about settling down, starting a family, and growing their careers, millennial homeownership is likely to increase. Which is why in order to cater to this generation, it's so important to understand what is it that they want out of life.
There are a number of reasons why millennials are looking to buy property. Because land values are more expensive, millennials are looking for homes that they can not only purchase but also rent out to others. Furthermore, given that land values are continuing to increase, millennials are also looking for an investment. Not only will this home serve as a place to live but also as an investment vehicle. Finally, millennials are also looking to marry homeownership with career growth.
WHAT DO MILLENNIALS WANT?
Knowing what we know about millennials, we've established that their wants and needs are slightly different from the prior generation. An extensive survey conducted by CBC found that they value meaningful work more than a well-paying job. This survey of more than 1,500 people found that close to half of these individuals would take a pay cut of close to $10,000 per year to do a job they found to be more meaningful.
What does it say about the millennials? It means that the millennial generation wants to have an impact on the world. They want to find purpose in their life because, if they are going to spend an extensive amount of time working during the week, they want their work to mean something. At the same time, it's important to remember that the millennial generation often lives paycheck to paycheck. Taking a pay cut of close to $10,000, even given their current financial situation, should say a lot about how important it is for them to find meaningful work.
Furthermore, a recent survey conducted by the Canadian Payroll Association found that close to half of Canadians would find it difficult to make ends meet if their paycheck was delayed by even seven days. So the idea of millennials that are willing to take a pay cut to find work that means more to them is quite telling.
MILLENNIALS ARE GETTING HELP FROM PARENTS WITH HOMEBUYING
Many millennials end up getting help with the down payment from their parents. A survey from a couple of years ago conducted by RBC found that more than a third of millennials who are planning on buying property in the near future would be getting help from their parents. Given that the baby boomer generation has enjoyed an increase in the value of their own homes, they can borrow against the equity in their home to help their children with the down payment on their first home.
Transitioning to property ownership requires knowledge and experience. At OnlyWith.ca, our teams of agents, many of whom are millennials themselves, have an intricate understanding of the Toronto real estate market and what it takes to make the transition smooth and successful. Reach out to one of our team members if you'd like help navigating the Canadian real estate market to find a property that fits your lifestyle.