Millennials Stepping Into the Real Estate Game
A fluctuating real estate market, rising home prices, and recent changes to mortgage rules are the perfect storm for buyers trying to navigate the rough waters of first-time home ownership. However, the millennial generation is resiliently managing to sail through, establishing a real estate footing. Recent studies show that millennials (born in the early-to-mid-80s) reaching adulthood, are optimistic about purchasing their first home and taking the smart approach to real estate investment.
Where home prices in the Toronto area average just under $850,000 (CREA, Q1 2018) this is a staggering difference from a decade ago when the average price was about $380,000 (TREB Historic Statistics.) These statistics haven’t chased millennials away with 84% believing that an investment in real estate is a wise choice, according to a home ownership poll conducted by RBC.
Over 32% of Canadians are expected to be on the forefront of first-time ownership over the next two years and millennials make up approximately half of that figure. But just where will they buy?
Getting your foot in the door
Greater employment opportunities in metropolitan areas are persuading young adults to look at options for living where they work. Condos and townhouses are becoming increasingly popular, but they don’t yield quite the same bang-for-your-buck on square footage or property size (if there even is property to consider). These are the affordable options for getting a foot in the door, though. If the home is in a new complex or development area, chances are the value will mature if bought at an early stage.
Commuter central
Taking the smart approach, millennials are also looking at investment outside of the city in more affordable regions and commuting for work. Compared to Toronto’s average of $850,000, Barrie and surround area’s averages a significantly lower price tag of around $585,000 (CREA http://creastats.crea.ca/barr/). If a commute is not feasible, leasing out a property offers the opportunity to earn a marginal income which can help subsidize the cost of renting a condo or apartment closer to work. 2016 Census data shows that approximately 50% of millennials were in a rental phase at the age of 30 compared to 45% of the baby boomer generation who hadn’t even stepped into the real estate game at the same age.
Vacation getaway
Even further outside the city, millennials are looking to vacation properties in cottage country as their step into the real estate market. A 2017 study by RE/MAX found that almost two thirds of millennials would consider buying a recreational property over the next decade. And yet another study by TD Bank found that millennials were twice as interested in recreational property investment as the rest of the population. Vacation properties allow for short-term rental income while still enjoying the benefits of a place to get away now and then.
If you are a millennial stepping into the real estate investment scene, one thing is for certain, no matter which approach you are considering, start by doing some financial modelling. Create a plan which includes all living and lifestyle scenarios, budgeting not only for the necessities but also the little luxuries. Include only steady income, housing and utility costs, auto loans, debt repayment, income taxation, unexpected overhead, and extra expenditures like a vacation or spending money fund. Buying your first home can seem a little daunting, but with your plan set in place and an experienced agent on your side to guide you, owning a home may not be far out of reach.
Got questions about achieving your real estate dreams? Give us a call – we’d love to talk.