Covid-19 has affected every aspect of what was once our normal lives. Across the world, the pandemic has reshaped the attitudes and habits of everyone in their personal, professional and public lives. The real estate market is no different and many young Canadians have reassessed and re-evaluated their approach to home ownership.
Across Canada, particularly in metropolitan areas such as Vancouver and Toronto, many young Canadians are changing their approach to real estate. With skyrocketing prices and changing work environments, some are forgoing the idea of home ownership altogether.
Housing affordability is not only a key issue in this election cycle, it is demonstrably a huge concern for Canadians of all ages. According to the Toronto Real Estate Board (TREB), in August 2021, the average sale price for homes in Toronto hit $1,070,911, a 12.6% increase from the previous year despite fewer transactions. It’s a fact. Home prices continue to rise and more and more younger people are struggling to enter the market.
Prior to the pandemic, Adam, a Toronto resident, planned to buy a detached home in the downtown area. When soaring prices and hyper-competition hit the market, he found himself reassessing his plans. Rent prices are high in Toronto and with the market prices for home ownership sharply increasing, it forced Adam to look outside of Toronto. With the advent of remote work becoming a viable and widely accepted form of work, Adam looked to cottage country real estate.
“As long as I can get good quality WiFi up north, there’s really nothing holding me to the city,” Adam said. Rather than forcing himself to stay in the downtown core in one of Canada’s most expensive cities, Adam’s dream of home ownership has changed drastically thanks to the pandemic.
Many young Canadians are opting to rent for longer. Remote working means that commuting is a thing of the past. That’s a huge saving both in time and money. Other options include moving back home as well as moving out of the downtown urban cores.
In a similar move, the remote work led many to jump into home ownership earlier than they originally planned. Space and office compatibility became huge priorities for many. With low mortgage rates, the pandemic pushed many into the real estate market. Indeed, the FOMO-induced buying frenzy marked an incredible hyper-competitiveness in the real estate market.
Oindrila and her husband began working remotely when the pandemic and lockdowns hit. They were living in a typical small, downtown condo in Toronto. Spurned by low interest rates, they made an offer on a house in Etobicoke. Despite the concerns about future interest rate hikes, Oindrila and her husband were successful and able to enter the real estate market much quicker than originally anticipated.
But what about the people who have been priced out of Toronto’s expensive market?
Well, many of them are looking outside of urban centres and, in many cases, out of the province. 46% of prospective buyers in Ontario under the age of 45 are considering moving outside of the province in their searches for an affordable home according to a survey commissioned by the Ontario Real Estate Association (OREA). Some people are even looking to the US. Many states offer enticing options for prospective buyers such as no state income taxes and significantly lower prices.
Creative options for home ownership are on the rise. Many buyers are looking to fast-track their renovations in order to have the option to rent out a portion of their home. Buyers who opted for a larger home are trying to insure themselves against potential interest rate hikes and subsidizing their mortgage payments by renting out a room or unit in their home.
Co-ownership is another option for many younger families to enter the real estate market. Lesli has helped many groups who would not be able to afford a home on their own, pool their resources together and buy a home together. Siblings and friends have achieved home ownership and have the ability to grow their families together.
There’s still a barrier to entry for many young Canadians: the dreaded down payment.
It’s common that many young Canadians get a significant amount of help from their parents when it comes to a down payment. Some studies have shown that 75% of young buyers have utilised the “bank of mom-and-dad” in some way for their down payment. This is great for many young Canadians but many who aren’t able to rely on their parents for help have seen the income inequality and the inequality of opportunities grow wider as the pandemic continues.
This is especially true for many renters who work in low-income work. According to Statistics Canada, high-income households are more likely to work from home while low-income households are more likely to be essential workers and do not have the opportunity to work remotely. This has further deepened the issue of affordability. Without the backing of family wealth, many young Canadians are unable to save for a down payment, forcing them out of the housing market.
It is time for more action and more creative options and alternatives ways for young Canadians to enter the property market. Remember to vote in the upcoming election this week!