The home-purchasing power of ‘peak millennials’ aged 25-31 has diminished by around $40,103 (16.5%) since the introduction of the OSFI stress test at the start of 2018.
A report from Royal Le Page calculates that nationwide, a peak millennial with a median salary of $38,148 has a maximum homebuying budget of $203,246. This includes a 20% down payment and the impact of the stress test.
That means that most peak millennials are well short of the $605,512 aggregate Canadian home value, meaning waiting to become a home owner or be creative with their home financing solutions, such as borrowing from family or pooling resources.
"We have seen a rare pause this year in the relentless rise in the cost of housing," said Phil Soper, president and chief executive officer, Royal LePage. "For peak millennials, the group which makes up the bulk of our first-time homebuyers, the path to property ownership has been a challenging one. In our largest cities, it is difficult for young people to purchase a home on a single household income. Some will purchase homes with family or friends, and some are following the age-old practice of saving money and waiting until they can effectively double their maximum budget with a life partner."
Couples compromise on space to afford a home
Couples have a typical maximum budget of $406,479 without help from parents, but prices in some areas mean that compromises on space are required for them to afford a home in the $325,000 to $425,000 price range.
In Greater Vancouver for example, prospective peak millennial purchasers can afford the least amount of living space with an average of 788 sq. ft. with an average of 1.5 bedrooms and 1.2 bathrooms.
Halifax delivered the biggest bang for a peak millennial's buck, offering them an average of 3.1 bedrooms and 3.0 bathrooms. In fact, of the seven cities studied across Canada, the region offered the most living space overall for prospective peak millennial purchasers, with homes in this price range averaging 1,736 sq. ft.
"There are striking differences in the options available to peak millennial purchasers across Canada," continued Soper. "While $425,000 will largely net an entry-level condo in Greater Vancouver and the Greater Toronto Area, on the east coast, this budget unlocks most of the market, offering prospective millennial purchasers large, detached homes with all of the bells and whistles."
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