Millennials in Toronto: The Reality of Buying Property
It’s no secret in this city – Toronto is expensive.
As a millennial growing up throughout some of the most significant GTA housing market changes, I have had a front-row seat to real estate inflation. The average price of a home in 2000 was $243,255, followed by 2010’s average of $431,262. Prices nearly doubled over the first Millennial decade. Now, in 2022 the average home price has surpassed $1,000,000 in the GTA. Millennials face climbing interest rates and mortgages valued well above monthly average rental costs. Even when prices get “better”, they’ll never look anything like they did when we were kids.
Buying property is a way different experience for Millennials than it was for their parents and past generations. Some of these differences have made it harder for them, while other social players have created stability in the first-time buyer’s experience. Regardless, Millennials and Gen-Zers are the first GTA generations to face the extreme difficulties of saving for a 20% down payment, especially if it is 20% of a million.
Earlier this year, Generation Squeeze published a cost analysis report on Ontario Millennials and property investing. The report showed that first-time buyers between the ages of 25 – 34 in the GTA would need to work approximately 27 years of full-time work to save enough money for a 20% down payment on an average home. In comparison, past generations worked an average of 6 years of full-time work to save enough for a down payments. In addition, the report showed that earnings would need to increase to $172,000 a year for Millennials to easily budget for property investing, which is nearly triple the current average full-time salary.
The truth is a lot more than full-time earnings goes into purchasing property for Millennials. In a 2018 report, Redfin surveyed 2000 first-time Millennial home buyers and sellers to uncover the reality of saving habits among young people. Fifty per cent of respondents claimed to be worried about having enough money for a down payment. Meanwhile, 36% reported using alternative sources to accumulate money for a down payment. Millennials have turned to second jobs, crypto and stock investments, retirement funds, family cash gifts, and inheritances to lighten the load of saving for a house. Trends in alternative savings habits have remained relatively stable throughout the pandemic as young people were encouraged to pursue entrepreneurial paths of income. Now, in 2022, most Millennials and Gen-Zers understand that if they want to afford property, they will have to save beyond their regular 9-5.
Throughout my journey as a real estate investor, I have seen how my peers and the media react to Millennial buyers in cities like Toronto and Vancouver. They highlight the obvious downsides of investing for our generation, much of which I have already summarized in this blog post.
It is expensive. It takes long to save up. You might never secure property in your desired location, especially if it’s closer to the city. You will need to do more than saving from your daily job; even then, investing on your own is a long shot.
With all this said, affording a house can be easier for the Millennials who set a goal and use strategic tactics to afford a down payment.
Here are five tips to help my fellow millennials achieve their property investing dreams!
1. Figure Out Your Plan
The first step to securing property is figuring out your desired location(s), your budget and expected budgeting timeline, and your co-signing/co-purchasing situation.
Think about your property area map. Are you looking in Toronto? North York or Mid-town? Would you settle for Scarborough? What about North York past Steeles? It is best to pick a few locations you would consider and then aim for your top three.
When you have your locations figured out, you can set appropriate budgets based on your preferred property type. Are you looking for a condo for two in Vaughan? Assess comparable condo prices in your favourite Vaughan neighbourhoods and budget for similar – be prepared to alter your budget with increases or decreases in the Vaughan condo market but do your research to create a workable number.
Lastly, figure out if you plan to invest alone, with a partner, friends and roommates, your parents, or siblings. Planning and saving for a down payment alone significantly differ from saving for a down payment with someone else. Before you commit to saving up to hundreds of thousands of dollars alone, consider your options and seriously approach your co-signer to embark on a plan together.
2. Research & Use Social Media
Keeping an eye on the market and learning tips and tricks to get into it with ease is easier than ever. Social media is a one-stop shop for learning everything you need to know about the current market, including what you should know if you want to invest now, next year, in five years, or eventually down the line.
Platforms like TikTok, Instagram and Facebook can be great places to connect with real estate agents and experts, some of whom may be Millennials themselves (hint: me!). The best thing about real estate agents on TikTok is that they are giving their audiences the raw details they probably would not get unless they sat down one-on-one with an agent. Real estate agents throughout the GTA release daily videos with market updates, insight into first-time home buying, tips for investing, and stories about the housing market. These videos can help you make more informed decisions throughout your home buying process, whether you are in your initial saving phase, or if you plan on buying this year.
And do not forget – the real estate agents you see on TikTok are real people. So, if you see someone you like, do not hesitate to reach out to them for their services. That is exactly what they want!
3. Pick Your Saving Tactics
Saving from each of your paycheques may seem daunting but setting a general budget for yourself and adhering to a bi-weekly or monthly saving tactic can beeline the process of securing investment funds. Best practices include opening a TFSA for your savings and setting an automatic bi-weekly or monthly deduction for continuous saving. However, if budgeting exclusively from your full-time job seems like a long shot, it may be time to turn to other avenues.
Finding additional means to make and save money is, now more than ever before, an option for many Millennials and Gen-Zers. This could include taking a second job on the weekends or part-time nights. For example, up to 15% of Redfin’s respondents said they planned to drive for a ride-sharing service such as Uber and Lyft as a side job to save up for property investing. In addition, over 30% of respondents planned to take on additional employment, which could include starting their own business or offering people an entrepreneurial service.
An increasing number of young people are taking their initial investments to the crypto and stock markets to build wealth for property investing. This market could be your gateway to saving sooner with the right tools and knowledge.
There are endless possibilities for Millennials and Gen-Zers to create wealth through secondary income streams. Use all available resources and be creative!
4. Think About Additional Sources
One thing about Millennials is that we are not afraid to ask for help where it is deemed appropriate. We have heard it all throughout the media growing up; most Millennials will not be able to buy property without help from their parents, and family funds aided many who already own property.
While everyone’s situation is different, it could not hurt to sit down with your folks to discuss cash gifts or loans that may propel your home savings journey. Options such as pulling equity from your parents’ home for investment purposes or renting out their basement for extra savable cash flow may be worth proposing. Perhaps your parents have an inheritance set aside for you, which you could access early. Talking these things out can be challenging, but if you and your parents are serious about your property investing goals, it may be worthwhile to bring it up.
5. Use Your Resources
You are not at a complete loss if your parents and other saving tactics do not cut it. Fortunately, the Ontario and Canadian governments have not turned a blind eye to the blatant struggles of young people in the real estate market. Thankfully, several programs and tax rebates are available for first-time buyers.
1. Home Buyers Plan
Withdraw up to $35,000 from your retirement savings plan to put towards a down payment
Couples can withdraw up to $70,000
Repayable annually over 15 years
2. First-Time Home Buyers Incentive
A second interest-free loan covering 5% or 10% of the purchase price of your property
Repayable when you sell or after 25 years
Program was extended until March 31, 2025
3. Land Transfer Tax Rebate
First-time home buyers eligible for up to $4000 on the first $368,000 of their qualifying home
First-time home buyers in Toronto may be eligible for an additional rebate of $4,475
4. Home Buyers Tax Credit
For Canadians purchasing after four or more years of not owning a home
Claim up to $5000 on taxes for a rebate of $750
As of January 1, 2022: claim up to $10,000 for a rebate of up to $1,500
To learn more about the first-time home buyers’ experience and Government programs, check out this blog post on First Time Home Buyers in Toronto.
There are numerous options for Millennials when it comes to buying their first home. It is not impossible, but it takes time and dedication. Young buyers need to be serious about their goals, save accordingly, and use all available resources for property investing. While it may be a journey, it is worth the end result. Owning property can create wealth for generations to come and acts as a stable, growing asset in anyone’s financial portfolio.
My parting note to Millennials: look at the society we’ve built. Look at the things we continue to do and change for the better. Look at how much work we put into our success stories. Do not let property investing be the hill we die on, even in a city like Toronto. We got this.
Interested in starting your home buying journey? Whether you just began to budget or plan to invest by the end of the year – now is never a bad time to reach out to a fellow real estate agent for guidance and insight.
Click the button below to connect with me! Let’s get you into the market on your terms.
