With some Canadian housing markets out of control, an ever-increasing amount of household debt, and incomes that aren’t keeping up with rising house prices, a number of Canadians are worrying that Millennials, people born between the early 1980s and the late 1990s, are getting squeezed out of the homebuying game.
Millennials are of the age where leaving their family home, getting married, and starting families are common, and these life changes often include buying a home. But if they can’t afford to do so, then it may have an effect on other aspects of society. Moshe Milevsky, a professor of finance in the Schulich School of Business at York University, told Vice Canada that if young people don’t find housing affordable and accessible, they’re more likely to lose their anchor to a particular geographic location, causing them to move away and seek opportunities elsewhere, or generally become less involved with their communities.
Apart from the potential for creating communities that are much more transient than they would be if the majority of residents were to own their homes, Millennials bowing out of the housing market could also have an effect on the housing market as a whole, as well as other industries. If Millennials aren’t getting into the market, what’s going to happen to people who are either trying to move up into bigger, more expensive homes? If the majority of a generation opts out of buying, then demand coudl dramatically decrease, along with home prices. There may also be slumps in construction, because no one will build if no one wants to buy. And the renovation boom that’s been happening for the past several years? Retailers like Lowe’s, Home Depot, and RONA depend on a revolving door of able-bodied people who want to improve their homes and protect their investment.
Not to mention that on a personal level, owning a home is often one of the biggest assets people have coming into retirement. It’s often touted as an investment, and the idea is that it will appreciate enough in value over time hat people will be able to sell it for a tidy profit and downsize, thereby giving them some disposable income after retiring; or homeowners can remain in their home once the mortgage has been paid off, keeping their housing costs relatively low after retirement.
Because of these reasons, there has been some concern expressed that Millennials are being kept out of the housing market, and nervous about those implications on the rest of society.
The projection offered by Canada Mortgage and Housing Corporation (CMHC), however, paints a different picture.
According to a CMHC Research Insight report, “Long-term Household Growth Projections for Millennial Generation”, the number of millennial households in Canada will more than triple in the next 20 years.
The number of Millennial households in Canada is expected to more than triple, to between 5.5 million, which is the lowest growth scenario, and 7 million, which is the highest growth scenario, in 2036, compared to 1.7 million in 2011. By 2036, more than a third of all households are projected to be Millennial generation households.
This may be out of sheer necessity for size as opposed to increased affordability; the share of couples with children is supposed to almost double by 2036, from 15 per cent in 2016 to 29 per cent. More people having children means that more people are going to want a bigger living space, one that’s often more than they can get either living with family members or in a smaller dwelling, like a rental apartment or a condominium. And that’s not relegated to couples, either, as the share of lone parent Millennial households is also expected to increase over this period, from 14 per cent to 22 per cent.
Currently, there’s a lot of talk about Millennials getting into home ownership by co-buying with other people
. The concept isn’t new, although co-owning and co-habitating with non-family members as a way to be able to afford housing is a phenomenon that’s become unique to certain housing markets. The share of two or more person non-family Millennial households, however, is projected to decrease considerably.
Another notable data point in this report is that about 60 per cent of Millennial households are projected to live in single-detached houses in 2036, replacing apartments as the most common dwelling type in 2036. This comes as detached home prices in some of Canada’s largest cities have swollen to more than $1 million over the past year.
About 72 per cent of Millennial households are projected to own their dwellings in 2036 in all scenarios, suggesting that maybe Millennials are just biding their time to get into the home they want in the location that they want. As the saying goes, "better late than never."
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate