Despite affordability challenges, majority of young Canadians see home ownership as a worthwhile investment Français

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Royal LePage Real Estate Services

Aug 22, 2024, 03:30 ET

Gen Z and young millennials are prioritizing saving, building good credit and reducing discretionary spending to achieve goal of home ownership

Highlights:

  • 84% of Canadians aged 18-38 believe that home ownership is a worthwhile investment, led by respondents in Saskatchewan and Manitoba (94%) and Atlantic Canada (93%).
  • Among those who do not currently own a primary residence, 74% say that home ownership is a priority.
  • 54% of those who prioritize home ownership believe that it is an achievable goal, while 26% are unsure and 20% do not believe it is achievable for them. Respondents in Quebec are the most optimistic, while those in Ontario are the least likely to say it is achievable.
  • Strong savings and confidence in their career trajectory cited as most common factors driving young people's belief that home ownership is achievable.
  • 75% of respondents plan to purchase a primary residence in their lifetime; 18% of them say they plan to buy within the next three years.
  • Nearly half (47%) of respondents who plan to purchase a home say they will not receive any financial assistance from family.

TORONTO, Aug. 22, 2024 /CNW/ - Despite chronic housing affordability challenges, Canada's next generation1 of homebuyer hopefuls believes that owning real estate remains advantageous as a long-term investment. According to a recent Royal LePage® survey, conducted by Hill & Knowlton,2 84 per cent of Canadians belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment.

Among respondents who do not currently own a primary residence, three quarters (74%) of those in the next generation of homebuyers say that owning a home is a priority for them and a milestone they hope to achieve in their lifetime. Young buyers understand home ownership is expensive. Just over half (54%) of respondents believe that home ownership is an achievable goal. Twenty-six per cent are unsure and 20 per cent do not believe it is achievable for them at all.

"It is not surprising that young buyer hopefuls see immense benefits in home ownership," said Phil Soper, president and CEO of Royal LePage. "What is both surprising and promising in these findings is the practical and purposeful manner in which these people are tackling affordability barriers. They are well educated on the state of the real estate market and the wide variety of government programs put in place to assist young families find homes. They are hyper-focused on saving for a down payment, which is often the biggest hurdle buyers face. And, they are open to creative solutions, such as shared ownership with friends and family, or buying a property with the express intention of renting a portion of the home to a tenant."

For many young Canadians, the aspiration to own real estate is rooted in the desire for long-term housing security. Approximately three quarters (73%) of the next generation of homebuyers who consider home ownership a priority say they desire a permanent place to live that is their own, while 57 per cent say that owning a home provides stability. Forty-five per cent say that renting is restrictive due to tenant-landlord policies, and 32 per cent say home ownership is a key part of their retirement plan. Respondents were able to select more than one answer to this question. 

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1 Generation Z is defined as individuals born between 1997 and 2012, while millennials are defined as those born between 1981 and 1996. For the purposes of this release, individuals referred to as 'next generation' refers to Canadians aged 18-38, those born between 1986 and 2006.

2 Hill & Knowlton used the Leger Opinion online panel to survey 2,280 Canadians, aged 18+. The survey was completed between July 22nd and July 31st, 2024. Representative sampling was done across all provinces (Atlantic provinces were aggregated and Saskatchewan was aggregated with Manitoba), with oversampling in SK/MB, Atlantic Canada, Toronto CMA, Montreal CMA, Vancouver CMA, and Calgary CMA. Age, gender, and household ownership weighting was applied to ensure representation at a CMA/province/region level, according to 2021 census figures. No margin of error can be associated with a nonprobability sample (i.e., a web panel in this case). For comparative purposes, though, a probability sample of 2,280 respondents would have a margin of error of ±2%, 19 times out of 20.

Young Canadians confident in their financial future

Among young Canadians who do not currently own a home, 75 per cent say they are planning to purchase a property as a primary residence in their lifetime.

"The youngest cohort of homebuyers in Canada have no shortage of barriers on their path to ownership. Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates," said Soper. "Despite these hurdles, the next generation of homebuyers remains committed to their pursuit of owning real estate, and are remarkably optimistic that they can make their dream a reality."

Fifty-eight per cent of respondents who say they don't believe in or are unsure about their ability to own a home say that their household will not earn enough income to support the monthly costs of home ownership. Fifty-two per cent say they do not have a large enough down payment saved up, and probably never will. Respondents were able to select more than one answer to this question.

Of those who say they believe home ownership is achievable, when asked why, 45 per cent of respondents say that they are saving diligently and feel confident that they will have enough savings in the near future to make a home purchase. Thirty-one per cent of respondents say they are on a career trajectory that will earn them a high income and therefore provide them with enough savings to buy a home, while 26 per cent say that they and their spouse have a high enough combined household income to afford a future home purchase. Respondents were able to select more than one answer to this question.

Young buyer hopefuls making sacrifices to reach home ownership goals

Forty per cent of respondents who are planning to purchase a home say that their timeline to buy a property is within the next five to 10 years, while 25 per cent say they are planning to purchase a home more than 10 years from now. Buoyed by the prospect of lower borrowing costs, nearly one in five respondents (18%) say they plan to purchase a home within the next three years, and another 13 per cent plan to buy in three to five years.

To reach their goal of home ownership, almost half (47%) of those planning to purchase say they are regularly saving a portion of their earnings for a down payment. Forty-two per cent say they are diligently paying their loans and bills to ensure a good credit rating, and 34 per cent say they are reducing their discretionary spending in an effort to save more. Thirty per cent are living with family and saving for a down payment, paying little to no rent. Respondents were able to select more than one answer to this question.

To increase their chances of being able to afford a home, 45 per cent of respondents who are planning to purchase say they would consider buying a property with the potential for rental income to offset their mortgage costs, and 31 per cent would consider a rent-to-own program, where the occupant leases the property and a portion of the monthly payments is put towards a future down payment on the unit. Respondents were able to select more than one answer to this question.

While parental involvement in first-time home purchases has become increasingly common in Canada, not all young buyers will be withdrawing from the bank of mom and dad. Nearly half (47%) of respondents say they will not receive any financial assistance from family members towards their home purchase. Meanwhile, 32 per cent say they will receive some form of financial support toward the purchase of their first home.

High home prices contributing to delayed achievement of major milestones

When preparing to buy a home, it is common to ease off on discretionary spending in order to maximize savings. Today, high real estate prices are prompting young people to take more aggressive saving measures in their pursuit of home ownership, such as delaying or foregoing major life milestones.

Twenty-seven per cent of young buyer hopefuls say they have delayed or eliminated travelling in order to save for the purchase of a home, while 21 per cent have delayed, or decided not to make, smaller but meaningful purchases, such as buying a car. Twenty-one per cent of respondents have delayed moving out of their parents' homes; 17 per cent have delayed or eliminated living on their own; 14 per cent have delayed or eliminated starting a family; and 11 per cent have delayed or eliminated saving for their retirement.

"In pursuit of home ownership, many young people are not only pausing small daily indulgences but also making compromises that impact their long-term financial stability. This includes sacrifices like delaying education and retirement savings, and putting off other major investments," noted Soper. "If policy makers needed yet another example of the impact of our nation's chronic housing supply crisis on the financial security and well-being of young people, this is it."

With the aggregate price of a home in Canada sitting at $824,300 as of the second quarter of 2024,3 and fixed-rate mortgage rates hovering around five per cent, saving a large enough down payment is taking longer today than it did for past generations. This is causing the average age of first-time homebuyers in Canada to go up, as evidenced in a survey by Sagen™, conducted by Environics Research with a series of questions for Royal LePage,4 which found that the largest percentage of first-time buyers is now over the age of 34.

Policy aimed at increasing affordability for first-time buyers

Financial institutions in Canada will now be allowed to offer 30-year amortizations for insured mortgages to first-time buyers of new construction homes. Previously, the maximum amortization period was 25 years. The newly available initiative by the federal government aims to increase affordability for first-time homebuyers, reducing monthly carrying costs by spreading out the debt over an additional five years.

"We know that young Canadians are eager to transition from renting to owning, and most remain hopeful they will. Government policies that make lending practices more favourable for the next generation of homebuyers will help young families achieve their real estate dreams, especially those in the country's most expensive markets," added Soper. "We hope to see these initiatives expanded to include resale homes as well."

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

REGIONAL SUMMARIES

ONTARIO

According to the survey, 82 per cent of people in Ontario belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment. Of those who do not currently own a home, 73 per cent say they are planning to purchase a primary residence in their lifetime.

"Owning a home is considered a valuable measure of success by many people in Canada. And, though Toronto is one of the most competitive markets in the country, young people here are very interested in purchasing real estate," said Tom Storey, sales representative and head of The Storey Team, Royal LePage Signature Realty. "There is an understanding that owning a home is more financially beneficial, not to mention more secure, in the long term than renting. Home prices wouldn't be as high as they are if there wasn't strong demand for the product." 

Storey noted that it's rare to see young buyers purchase a freehold property as their starter home. Most first-time buyers are entering the market in a condo, which he says is a great way to get started and build some equity.

Among respondents in Ontario who do not currently own a primary residence, 75 per cent say that owning a home is a priority for them. Less than half of respondents (47%) believe that home ownership is an achievable goal, the lowest among all regions in Canada. Twenty-seven per cent do not believe it is achievable for them at all and 26 per cent are unsure.

When asked why the goal of home ownership is important to them, 65 per cent of the next generation of homebuyers in Ontario say they desire a permanent place to live that is their own; 62 per cent say that owning a home provides stability; and 52 per cent say that renting is restrictive due to tenant-landlord policies. Respondents were able to select more than one answer to this question.

"With so much information and data about the market available online and on social media, many young buyers are coming to the table highly educated. They've done their research, they're asking all the right questions and are prepared to do what's necessary in order to get on the property ladder, even if they realize it will take longer for them than it did for their parents," said Storey. "We're having preliminary conversations with people as young as 20 to 25 years old, even if they're not ready to buy. A lot of our younger clients are preparing for an eventual purchase by taking advantage of government incentives, like the First Home Savings Account (FHSA). I recommend this to anyone who has never purchased a home."

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

QUEBEC

According to the survey, 81 per cent of people in Quebec belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment; below the national average of 84 per cent. Among respondents who do not currently own a primary residence, 71 per cent say that owning a home is a priority for them.

While Quebec's next generation of homebuyers is the least likely in Canada to say that home ownership is a worthwhile investment, it is the most likely to believe that owning a home in their lifetime is an achievable goal (64%). That being said, Quebecers are the least likely to say they plan to buy. Of those who do not currently own a home, just 64 per cent say they are planning to purchase a primary residence in their lifetime.

"Quebec respondents value home ownership as a solid investment, albeit at a lower degree than their Canadian counterparts and differently than past generations like the baby boomers," said Diana Campbell, residential and commercial real estate broker, Royal LePage Village. "With a focus on lifestyle flexibility – embracing travel and life experiences – they see home ownership as one of several ways to secure their financial future, rather than the sole focus. This generation understands the importance of balancing long-term goals with living in the moment. On the other hand, they are more optimistic about achieving home ownership one day, which does not come as a surprise given Quebec's real estate market's greater affordability."

When asked why the goal of home ownership is important to them, Quebec respondents buck the trend. While a majority of Canadian respondents (57%) believe that home ownership provides stability, that is true for only 38% of their Quebec counterparts. On the other hand, Quebec's next generation of buyers are more likely to aspire to home ownership in order to have a permanent place to live that is their own (80%), compared to the national average (73%). Looking forward, Quebec respondents are the least likely in Canada to say that home ownership is a key part of their retirement plan. Respondents were able to select more than one answer to this question.

"For those looking to enter the housing market, my advice is to start by solidifying your financial foundation," said Campbell. "Work on building a strong credit score, save diligently for your down payment, and explore all available home ownership programs. In Quebec, where affordability is still within reach for many, it's crucial to stay grounded in your budget. Avoid the temptation to look beyond what you can comfortably afford, and instead focus on finding a home that meets your needs today and in the medium term. Remember, your first home is a stepping stone, not the finish line."

Receiving financial assistance from family can provide a leg up for many first-time buyers, however survey results show that less than one third of the next generation of buyers in Canada who plan to buy (32%) expect to benefit from such a contribution.

"Parents who want to help their children enter the housing market should start planning early. Whether it's contributing to a down payment or providing financial guidance, their support can make a significant difference. However, it's crucial to ensure that any assistance offered is part of a well-thought-out strategy," she concluded.

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

BRITISH COLUMBIA

According to the survey, 83 per cent of people in British Columbia belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment. Of those who do not currently own a home, 77 per cent say they are planning to purchase a primary residence in their lifetime.

"There is a very positive association with owning real estate amongst young Canadians. Although transacting in urban markets like Vancouver can feel unattainable at times, the overall sentiment from this demographic is that owning their home, regardless of the property type, is a valuable and worthwhile long-term investment," said Adil Dinani, sales representative and team lead of the Dinani Group, Royal LePage West Real Estate Services. "With this goal in mind, this generation is willing to make lifestyle adjustments or find alternative ways to enter the market, whether it be purchasing with friends or family or even relocating to more affordable regions."

Dinani noted that for many young buyer hopefuls, high lending rates are a major barrier to entry, keeping them in the rental market longer. "Once rates begin to come down in a meaningful way, we will see a higher percentage of people in this demographic moving away from renting and into home ownership."

Among respondents in British Columbia who do not currently own a primary residence, 75 per cent say that owning a home is a priority for them. Approximately half of respondents (51%) believe that home ownership is an achievable goal. Twenty-five per cent are unsure and 24 per cent do not believe it is achievable for them at all.

When asked why the goal of home ownership is important to them, 81 per cent of the next generation of homebuyers in British Columbia say they desire a permanent place to live that is their own; 68 per cent say that owning a home provides stability; and 40 per cent say that renting is restrictive due to tenant-landlord policies. Respondents were able to select more than one answer to this question.

"Home ownership is a highly valued milestone for many in the generation Z and young millennial demographic, making it a key priority for their future. While some young buyers expect to receive financial assistance from their families, others are reassessing their finances and making the necessary adjustments to achieve this goal. They are doing a thorough analysis of their income and spending habits, and are cutting back on expenses where possible," Dinani added. "Young Canadians should remember that opportunities exist in every market, regardless of its current state. Rather than feeling pressured to act immediately, take the time to explore, understand and become comfortable with the opportunities available to you."

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

THE PRAIRIES

According to the survey, 86 per cent of people in Alberta (94% in the provinces of Saskatchewan and Manitoba, the highest of all regions in Canada) belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment. Of those who do not currently own a home in Alberta, 88 per cent say they are planning to purchase a primary residence in their lifetime.

"Whether they are receiving financial help from their parents, or are looking to get into the real estate market on their own, young Canadians shopping in the Calgary region tend to have one thing in common – they prioritize affordability and flexibility in a home purchase, and seek to maintain the lifestyle they had while renting," said Doug Cabral, sales representative, Royal LePage Benchmark in Calgary, Alberta. "Unlike their parents' generation who tended to buy and stay in the same home for many years, young homebuyers are prepared to climb the property ladder as their equity builds. For many, getting a large, detached property early in life is not attainable, so they are prepared to buy a starter condo first, then graduate to a townhome or larger property as they become more financially established."

Cabral added that young buyers will often opt for a smaller home if it means getting into a neighbourhood they really like, versus relocating to the suburbs where larger homes tend to come at a more affordable price tag.

Among respondents in Alberta who do not currently own a primary residence, 74 per cent say that owning a home is a priority for them (86% in Saskatchewan and Manitoba, the highest of all regions in Canada). Approximately half of respondents in Alberta (53%) believe that home ownership is an achievable goal. Twenty-six per cent are unsure and 21 per cent do not believe it is achievable for them at all.

When asked why the goal of home ownership is important to them, 77 per cent of the next generation of homebuyers in Alberta say they desire a permanent place to live that is their own; 62 per cent say that owning a home provides stability; and 46 per cent say that renting is restrictive due to tenant-landlord policies. Respondents were able to select more than one answer to this question.

"The parents of generation Z and young millennials know first-hand the benefits of owning real estate, and are happy to help their children financially if they are able to. It's not common for parents to give their adult kids an entire down payment. Instead, we often see parents providing a top-up towards a purchase so their children can qualify for a property of higher value," said Cabral. "Today's young buyers are more educated than ever on the process of buying a home, but are also highly aware of the hurdles that lie in the way of ownership. It's never too early in your home buying journey to engage a mortgage broker or real estate professional who can help you map out savings goals."

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

ATLANTIC CANADA

According to the survey, 93 per cent of people in Atlantic Canada belonging to the adult generation Z and young millennial cohort – those aged 18 to 38 or born between 1986 and 2006, and referred to in this release as the next generation – believe that home ownership is a worthwhile investment. This is among the highest in the country (94% in Saskatchewan and Manitoba), and well above the national average (84%).

"The entry-level market where most first-time buyers are shopping is often the most competitive, making the process long and stressful, and at times discouraging. To increase their odds of getting into the market, the youngest generations of buyers have adjusted their expectations for the type of home they can buy," said Tanya Colbo, sales representative, Royal LePage Atlantic in Halifax, Nova Scotia. "Unlike their parents and grandparents who tended to seek out move-in ready homes, young people are willing to settle for a property that needs some work if it means securing the price and location they desire. Properties that have a rental unit are especially appealing to young homebuyers, as it has the potential to make monthly carrying costs more affordable."

The home ownership rate among this cohort of young Canadians is higher in Atlantic Canada (58%) than the national average (51%), likely due to the market's relative affordability, although prices have increased materially since the pandemic-fuelled real estate boom, which saw remote workers and retirees from all across the country flock to the region.

"In Atlantic Canada, we see a lot of young buyers receiving financial help from family. Parents are aware of the state of the market and the challenges ahead for their kids, and are willing to give their children a financial gift or a living inheritance to support their home ownership dreams. For many, the down payment is the biggest challenge. That's why it's important for buyers to explore what local and federal programs are available that can give them a leg up. A mortgage broker or real estate professional can also provide a wealth of information that can help anyone transition from renter to owner," added Colbo.

Royal LePage 2024 Next Generation Survey - Data Chart:
rlp.ca/2024-Next-Generation-Survey-Chart

Royal LePage resources for future generations of homeowners:

To help the next generation of Canadian homebuyers, Royal LePage has published a number of online resources available at the following links:

About the Survey

Hill & Knowlton used the Leger Opinion online panel to survey 2,280 Canadians, aged 18+. The survey was completed between July 22nd and July 31st, 2024. Representative sampling was done across all provinces (Atlantic provinces were aggregated and Saskatchewan was aggregated with Manitoba), with oversampling in SK/MB, Atlantic Canada, Toronto CMA, Montreal CMA, Vancouver CMA, and Calgary CMA. Age, gender, and household ownership weighting was applied to ensure representation at a CMA/province/region level, according to 2021 census figures. No margin of error can be associated with a nonprobability sample (i.e., a web panel in this case). For comparative purposes, though, a probability sample of 2,280 respondents would have a margin of error of ±2%, 19 times out of 20.

The data used in this report reflect responses from Canadians born between 1986 and 2006.

About Royal LePage

Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of approximately 20,000 real estate professionals in over 670 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage® Shelter Foundation™, which has been dedicated to supporting women's shelters and domestic violence prevention programs for 25 years. Royal LePage is a Bridgemarq Real Estate Services® Inc. company, a TSX-listed corporation trading under the symbolTSX:BRE. For more information, please visit www.royallepage.ca.

Royal LePage® is a registered trademark of Royal Bank of Canada and is used under licence by Bridgemarq Real Estate Services® Inc.

SOURCE Royal LePage Real Estate Services

For further information, please contact: Charmaine de Silva, Hill & Knowlton on behalf of Royal LePage, [email protected], (604)-360-2328

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Royal LePage Real Estate Services