In 2019, Konstantin Polyakov did a  number of presentations and talks on the topic of ‘How does next generation buy a home?”. While a topical question today, it was at one point almost  considered rhetorical. In the mid 2010s Toronto and Vancouver markets ran out of real estate inventory and became virtually unaffordable to the first time home buyer.

There are a myriad of reasons why millennials have difficulty affording their first home and starting a family. Perhaps the biggest one of all though, is lack of affordability. While an average millennial in Canada today makes just a little bit under $40,000/annually, the amount of income required to qualify for a $400,000 purchase- with minimum down- is around $100,000/annually. So, not only does it take an average of two millennials to buy one home, but the above also assumes no other debts are present… and that’s not always the case with all millennials.

Despite being one of the more educated generations in Canada, Millennials are also the generation most heavily burdened by student debt. On average, most millennials graduate with $15,000 -$30,000 worth of student debt that converts into ~$200/month to ~$400/month (depending on income levels and other factors). Considering that for every $100,000 worth of a mortgage it takes ~$350-400 to service the debt, it doesn’t take long to calculate that an average student loan cuts out about $50,000 to $100,000 worth of purchasing power- just by increasing the borrowers debt servicing ratios.

Another common pitfall with most millennials is, unlike the previous generations which tend to underutilize credit, millennials are used to living in credit. In fact, the first big purchase most millennials set their eyes on is a brand new car. Unfortunately, most car lease/financing options start at a monthly payment of ~$300-400/month. Yet again, an average millennial loses ~$75,000 – $100,000 worth of purchasing power to their need/want for a new vehicle.

Since the market correction of Summer 2017, there’s been some cooling in the once-hot Toronto and Vancouver real estate markets. This correction created a unique opportunity. Those millennials who have been diligently paying off their debt and saving up for a down payment, were finally able to make moves during the past 12 months. We have seen a significant increase in millennial buyer activity this past spring with price range of $550,000 – 700,000 being the most popular segment of the millennial real estate market.

The key factors driving this trend are:

1. the more desirable real estate markets (namely, Toronto and Vancouver) have seen some significant price adjustments in the last 24 months
2. most millennials are reaching their highest income potential around now
3. most millennials are coming close to paying off their student and other unsecured debt
4. most millennials are for the age to start families which yields a greater household income and overall purchase power

Earlier, Konstantin was interviewed by the Mortgage Broker News to discuss why there’s been so much activity amongst millennials this past spring of 2019.

Here’s a link to the article, enjoy!

https://www.mortgagebrokernews.ca/news/millennials-driving-detached-sales-in-gta-this-summer-297449.aspx?utm_source=Pinpointe&utm_medium=20190820&utm_campaign=&utm_content=&tu=