Canadian millennials financially unprepared for home ownership
While owning a home is high on the list of aspirations for Canadian millennials, few are on track to turn their dreams into a reality.
A new study by CIBC revealed that while almost half of millennials in the country intended to buy a home in the next five years, 76% of them hadn’t saved more than a quarter of their down payment. In fact, just 9% of millenials currently renting or living with family have saved about half of the total sum necessary, and a mere 7% have managed to accumulate the whole thing.
"Few millennials are taking the necessary steps to make the move to homeownership," says Grant Rasmussen, Senior Vice President, Mobile Advice, CIBC. "You can't buy a home with intent and desire alone.”
It seems the main reason millenials make plans for home ownership is to set up roots for their future, and almost half of respondents admitted that they think renting is a “waste of money”. Despite this, millenials who have bagged themselves a spot on the housing market spend almost 50% more on housing costs than their renting counterparts. Housing costs seem to be one of the biggest things to unexpectedly hit young homeowners, more than half of them admit they didn’t quite understand the total costs of owning a house prior to their purchase.
Yet despite having to fork out larger chunks for maintenance, millennial homeowners are still managing to save more each month than those that rent of live at home-approximately $566 compared to around $360. With an average nest egg of just over $60,6000, millenial home owners actually have a real opportunity to strengthen funds for their future, especially when fewer renters consider saving a priority.
"While most still dream of owning a home one day, higher house prices, the prospect of higher rates, and new qualifying rules are prompting some millennials to pause and question whether being a homeowner is realistic or even desirable for them," says Mr. Rasmussen.
In Toronto alone, the last few months have seen a notable increase in the cost of new homes, due in part to a lower number of new builds yet higher demand. In February, the benchmark price for condominium apartments, stacked townhouses and loft units rose 39.5% from last year-to a whopping $729,735. Furthermore, a report released by the Toronto Real Estate Board, noted only 7,228 residential transactions last month in comparison to the previous year, which saw a record 11,954 sales.
“The key is to understand your total housing costs and start planning early so you can consider your rent versus buy options in the context of your overall financial plan and desired lifestyle," advises Rasmussen.