Millennials risk deep debt on home dreams
VANCOUVER — A new report says soaring property prices and lower incomes in Vancouver are leaving many young homeowners in debt compared with millennials in 10 other Canadian cities.
Vancity Credit Union found that a typical couple aged 25 to 34, with a combined annual income of about $72,000, faces a monthly debt of $2,745 after property costs and other essentials such as taxes, food, utilities and transportation.
The report said the lack of purchasing power is greatest in Vancouver, but that so-called millennials in Toronto are close behind with just over $3,300 remaining after housing and other basic costs are paid.
In Victoria, millennials are a little better off, but not by much. According to Vancity’s study, a millennial couple who bought a property in 2016 at an average price would have $12,200 left in discretionary cash at the end of a year -- that is the third worst result in the country.
“Victoria and Vancouver are beautiful places to live, and so there will be demand on housing which keeps pricing higher than in other areas,” noted Victoria Real Estate Board president Mike Nugent. “Of course the amount of discretionary income anyone has will depend on what sort of a home they purchase. There is a huge difference between the mortgage on a $200,000 condo and a $500,000 home.
“The report mentions that condos will leave you more money each year -- $30,000 for our area. So here in Victoria, buyers make that choice. Is their type of home more important or is having a greater amount of disposable income.”
Nugent said if millennials determine where their priorities lie in getting into the market, they have options. “I think anyone, not just millennials, can look at the options available in our area -there are condos, smaller houses outside of the core that offer more variety in pricing,” he said.
“The first home you purchase will likely not be the only home you purchase, but it is an investment that will help you move closer to your dream home over time.”
The picture is a little different in places such as Edmonton, where millennials hang onto more than $47,000 in discretionary funds, the highest in Canada.
The report said that when childcare is added, a Vancouver family with one youngster in fulltime care faces a debt of more than $17,000 per year.
Income and household spending costs in the report are based on Statistics Canada data while housing figures based on prices for March 2016 are from real estate boards across the country.
Vancity warned that millennials in Vancouver may need to reconsider home ownership as the first and best way to create wealth and adds that lack of rental housing in the region is also a problem.
“The status quo isn’t good enough if we want this generation to be able to put down roots, possibly have a family and still enjoy a basic quality of life in Vancouver,” said William Azaroff, Vancity’s vice-president of community investment.
Yearly costs for an average home purchased in Metro Vancouver in 2016 are $44,354, and the report says that millennials would have to give up the dream of a single-family home in order to ease the budget crunch.
Buying a townhouse at an average cost leaves about $9,549 annually in discretionary income, and that climbs to $16,422 if a condominium is purchased, the report said. Vancouver lacks an adequate supply of townhouses for families who can’t afford homes.
“Toronto and Vancouver are particularly difficult cities in which to raise a family and have money left over to nurture and improve well-being,” the report concludes.
“In these cities, basic expenses eat up the majority of income. And in Vancouver, this can be directly correlated to skyrocketing prices for stable, appropriate and affordable housing.”
The study makes a number of recommendations, from tax credits for new housing development to repurposing of public and community-owned land and creation of thousands more units of rental housing by 2021.