Young buyers discouraged by urban housing market
Survey finds prices daunt would-be homeowners — but less so in Calgary
They’ve seen the future, and they can’t afford it.
The vast majority of young people in Canada’s largest cities worry they will not be able to buy a home in their community of choice because of rising real-estate prices and the cost of living, a new report states.
Researchers with Sotheby’s International Realty surveyed 1,502 Canadians between the ages of 18 and 28, living in Vancouver, Calgary, Toronto and Montreal to quantify a growing sentiment among members of Generation Z that young people have been priced out of the neighbourhoods where they grew up.
In the coming years, the Canadian real estate market is set to absorb an influx in demand from a younger generation of homebuyers. But the survey results reveal that half of them have “already given up” on the traditional dream of owning a single-family home, while 82 per cent say they are doubtful they will be able to afford a home of any kind in their nearby locales.
In the Greater Toronto Area, most respondents cited their current living expenses and student loans as the top barrier to saving for a down payment. Those who do expect to afford property in Toronto said that, for the most part, they expect their first purchase to be a condominium unit.
“The biggest financial barriers for gen Z are the current living expenses. Home prices are way up, and the impact of inflation can translate into the increased costs of building materials to build homes,” said Don Kottick, president & CEO of Sotheby’s International Realty Canada.
Respondents outside Toronto and Vancouver had a more optimistic view of home ownership. In Calgary, where home prices average $540,900, young would-be buyers are more confident they will be able to purchase a single-family home. Only 39 per cent of respondents there had abandoned that dream, the report found, compared to 56 per cent in Vancouver, 52 per cent in Toronto and 48 per cent in Montreal.
Finn O’Driscoll, a 21-year-old who manages a ski shop in Calgary, purchased a single-family home with his friend during the COVID-19 pandemic. He repurposed the money he had been saving for college and put it towards a house.
“Looking at the prices of rent in Calgary, we realized it was similar to what one would pay monthly for a mortgage. So we just thought we’d go 50/50 on a house,” O’Driscoll said.
In Toronto, the average monthly rent for a two-bedroom apartment increased 67 per cent over two decades — from $979 in 2000 to $1,637 in 2020, according to the Canada Mortgage and Housing
Corporation.
Housing market activity during the pandemic has added to young homebuyers’ woes. A CMHC study found that the total number of mortgage transactions surged in 2020, as buyers scrambled to snag real estate while interest rates were low.
The dramatic rise in housing debt, valued at roughly $2 trillion nationwide, has fuelled fear among economists that some Canadian homebuyers are in over their heads and exposing themselves to a correction in the real estate market.
In October, the International Monetary Fund raised the spectre of markets, including the housing market, correcting or crashing amid uncertain global economic conditions, including labour-market and supply shortages, inflation and a slowdown in the economic recovery.
Royal LePage CEO Phil Soper has said he expects this winter’s housing market will be “unusually busy.”
Kottick contends that there are optimistic take-aways from the survey.
“Based on their earnings at this time, gen Z is worried about the future,” he said. “But bear in mind that this is a young cohort that has yet to see their earning potential increase, and has yet to receive generational wealth transfers. All of that could change as they get older — and for many of them, that could change their position in the market.”