It’s not an easy time to be a millennial home buyer in Vancouver. Increasingly high prices, low inventory and new mortgage qualification changes have made it a challenging time for young adults to enter the local real estate market.
Market conditions in Vancouver have millennials feeling “left out” of the idea of home ownership, and have even caused some to consider leaving Vancouver altogether. In a city where home ownership can feel like an impossible dream for twenty- and thirty-somethings, local industry professionals weigh in with their best advice for Vancouver’s millennial cohort.
Growing housing costs in British Columbia have meant that many in the “peak” millennial age bracket – those currently aged 25 to 30 – who want to buy a home are not able to, according to a provincial survey by Royal LePage released in August 2017.
“Facing challenges their baby-boomer parents never encountered, peak millennials are confronted with significant obstacles that vary depending on where they live,” says Phil Soper, president and CEO of Royal LePage. “While finding employment in our largest urban markets, Toronto and Vancouver, is relatively easy compared with other areas of Canada, buyers face limited inventory and high home values in these regions.”
Homeownership rates dropping
When compared to their baby-boomer parents, millennial buyers are slower to enter the Canadian real estate market, oftentimes opting to rent instead of buy.
According to 2016 Census data released by Statistics Canada, just over half (50.2 per cent) of millennials who no longer lived with their parents were home owners in 2016, compared with 55.5 per cent of baby boomers back in 1981.
StatsCan also found that in the Vancouver Census Metropolitan Area (CMA), Vancouver had one of the highest proportion of households (32 per cent) whose housing costs were considered unaffordable – meaning that families were spending 30% of more of their total family income on housing costs. With conditions like these, it’s easy to see why millennials have struggled to navigate Vancouver’s real estate market.
The federal government introduced a mortgage “stress test” last fall, which came into effect January 1. The test was once applied only to mortgage applicants of insured mortgages (those with less than 20 per cent down), but has now been extended to all mortgage applicants to include uninsured borrowers, who make up a larger portion of the mortgage applicant pool.
The stress test requires an applicant’s income to qualify them for mortgage repayments at the Bank of Canada’s five-year posted rate – higher than the discounted rate they would pay in reality – to create a buffer against future rate rises and any financial difficulties.
Some believe that the new stress test is a positive thing for millennial buyers. “Over the last eight or nine years, we’ve become very much used to ultra-low mortgage rates and I think that is changing,” says Barry Magee, a Vancouver-based real estate agent. “We’re going to get more back to a normal level of mortgage rates. If the government is looking out for you and adding that stress test and that extra 2% it’s probably a good thing and something millennials should listen to.”
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