A couple with an average maximum budget of $406,479 will get an average of 1.5 bedrooms and 1.2 bathrooms in Greater Vancouver at 788 square feet, where the same budget will fetch Ottawa buyers almost double the space with an average of 2.9 bedrooms and 2.3 bathrooms and 1,495 square feet.
Given the aggregate Canadian home value is $605,512, many young people nearing home ownership (typically between 25 and 31) are being forced to either sacrifice space downtown, or move to the suburbs.
“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. “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.
With a median salary of $38,148, this generation now has an estimated maximum home buying budget of $203,246; whereas, in 2017, that amount would have been $243,349. This factors in a 20 percent down payment, and the impact of Office of the Superintendent of Financial Institutions’ (OSFI) new stress test. Buyers now have to qualify for the negotiated rate plus two percentage points — or at the five-year benchmark rate published by the Bank of Canada, which is currently 5.14 per cent with less than 20 percent down.
Frank Napolitano, managing partner at Mortgage Brokers Ottawa— who estimates that millennials makeup around 35 percent of the Canadian home buying market — says that, unlike buyers in the Toronto market, he hasn’t seen many clients who have had to put their dreams of home ownership on the back burner because of high prices and stricter lending rules. However, some clients do need to be more creative when it comes to pre-approval. “In Toronto, my co-workers’ business is down 30 to 40 per cent this year because of the new rules,” says Napolitano. “But in Ottawa, it’s much less impactful. What we are seeing a lot of is millennials are having to buy their homes with either their parents having to gift them (money) to increase their down payment — or their parents actually having to co-sign with them.”
While the report refers to properties within Ottawa remaining “relatively affordable,” with a median aggregate home price of $437,243 in the first quarter of 2018, multiple offers are making it difficult to secure deals. Susan Chell, a broker with RE/MAX Hallmark Realty Group, sees a lot of millennials aiming for income low-maintenance properties that tend to be close to the new and future LRT stations. In our largest cities, it is difficult for young people to purchase a home on a single household. “They are looking for condos that are affordable to get into the city,” says Chell. “If they can’t afford to be in the city then they want to be in a freehold townhouse or low-maintenance semi … and be close to the transit, they think is going to take off down the road.”
Adam Mills of Royal LePage Team Realty Adam Mills, Brokerage agrees. He says the millennial who isn’t buying a condo in the core, close to nightlife and amenities, will likely go farther afield for more space. “(With) the slightly older group of millennials, usually they have found somebody at that point in time or maybe they have a dog, and now they are buying townhouses in Barrhaven, Riverside South, Findlay Creek, Kanata, Stittsville, that kind of suburb environment,” says Adam Mills, broker of record, Royal LePage Team Realty Adam Mills, Brokerage.