IS THE MILLENNIAL HOUSING CRISIS GETTING WORSE?2018-06-28 13:21:32 Posted By Amir Hamzehali
It was on the news by HuffPost Canada this month that the Mortgage borrowing among Canada's millennials sees major pullback!
According to new data from credit bureau TransUnion, new mortgage originations among millennials in Canada fell by 19.5 per cent between the last quarter of 2017 and the first three months of 2018, when tougher new federal mortgage rules kicked in.
That's a much steeper drop-off than seen in other age groups. For the country as a whole, mortgage originations were down 8.8 per cent, and among the elderly pre-war Silent Generation, mortgages actually grew by 7.8 per cent.
That study found the average age of a first-time home buyer in Canada is 32, and the average household income of a first-time buyer is $85,000.
The reduction in mortgage originations among the Millennials is an indication that the home ownership among this age group is on a decline!
This is not much of a surprise as the new mortgage rules and rising interest rates have reduced the purchasing power of our first-time home buyers by almost 25 percent since last year, while the prices of less expensive and more affordable properties had minor to no declines.
The cost of rents are also rising fast and will further add to the Millennial’s housing crisis!
As we know, people’s housing options are between renting or owning a space. The sharp decline in home sales and ownership combined with our growing population will definitely push people towards renting. This will eventually put more upward pressure on rent costs considering our limited rental supply.
Not every Millennial has the luxury of staying with their parents until becoming a homeowner, or further, to get help from the bank of mom & dad to purchase a house! The rising costs of rent will further dig into the Millennial’s savings needed for the down payment of their home purchase.
It seems the benefit of cooling the booming markets by the Government has come at the cost of worsening the Millennial’s housing affordability!
We should not want or expect that this massive social problem for our young people to get fixed by our housing prices to drop dramatically! With no doubt, such an event would create other major social and economical problems for our country!
There are certainly other ways such as the Government promoting the construction of affordable housing with the priority of ownership to be given to the first-time home buyers to tackle this problem! The Government can also boost the Canadian’s income by encouraging the high paid multinational industries such as movie and technology to move to our cities!