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High housing prices and mortgage rates are leaving millenials out in the cold. Young couples can combine incomes and make it work, but single grads face years of saving and rent before they’re able to get their own place.
Statistics Canada released its Consumer Price Index at the end of February, showing that Canadian housing prices increased 1.5 per cent overall this past year. Prices in Toronto rose 6.1 per cent over the last year, according to the Teranet-National Bank house price index released on March 12.
Mortgage rates are still low at five per cent, making it easier to get the finances together for a home. But some experts predict that mortgage rates will soon start to rise.
And there are more and more singles going through their twenties. The median age at first marriage is now the highest in modern history — 29 for men and 27 for women, according to a study by the Pew Research Centre. A March 2014 study reported that 69 per cent of millenials were unmarried.
That will be a problem for some students who plan on buying a property right away. Graduate Gabe Lam and his fiancé, a current University of Toronto student, plan on buying a house next year. They are getting married this summer and will live in her parent’s basement for a year. During that time, they hope to save up for a down payment and get approved for a mortgage.
“We’ve had a lot of support from our family, which is essential,” Lam says. But Lam and his fiancé aren’t the norm.
The 2008 economic downturn and the struggle for young adults to pay back student debt make it harder for recent grads to buy a home.
Walter Melanson, director of partnerships at PropertyGuys.com says most students aren’t marrying until much later and this is one reason many aren’t buying homes. Melanson says most students need two incomes to pay for a property, or if single, save for years to be able to afford a place.
For single recent graduate Amber Hickson, it will be a few years before she can buy a place of her own. She has student debt to pay back and then will start saving up. For now, she rents a house downtown with four housemates. Renting is like “throwing your money away on something that isn’t giving anything back to me long term,” she says.
Hickson, a 2013 Ryerson fashion communication graduate, looks forward to the day when she is settled with a place of her own. Hickson, 30, said that she can’t wait to trade in some mismatched and second-hand furniture for grown-up and classy decor, but she can’t invest in that yet because she doesn’t know where she will be long-term.
In a job market that’s uncertain, it’s hard to say where you’ll end up or how long you’ll be there, says David Ambroski, Ryerson Centre for Urban Research and Land Development director.
“That’s the question we’re asking in the market right now,” he says. “Where will (millenials) live once they get married and have kids? Will the markets respond and will it be affordable?”
White picket fences are not the only motivation for young property buyers, some students see buying property as an investment. Business management student Shelina Ally knows students who have bought properties while studying at Ryerson to start their investment portfolio.
This is another reason students should consider the real estate market, Melanson says. He says that buying a property is an investment that, unlike a car, will continue to be valuable in the future.
For Shelina Ally, president of Real Estate Ryerson, investments are a good route for students who want to start making long-term money.