A new study titled Straddling the Gap conducted by the non-profit group Generation Squeeze reports that either home prices would need to decrease considerably, or incomes would need to almost double for millennials to be able to afford a home. This paints a dismal picture for many would-be first-time home buyers and could even discourage millennials from aiming for homeownership.
The Government of Canada introduced a National Housing Strategy with incentives for first time home buyers which aim to reduce monthly mortgage payments, but it does not address the issue of qualifying for a mortgage under CMHCâ€™s new stress test.
Can millennials afford to buy a house
In the Greater Montreal region, prices for a single-family home have increased 5% when compared to May of 2018. Condo prices have increased about 2%. The increased prices coupled with the new mortgage stress test limits the budget of first-time home buyers, but homes are still affordable in Montreal. If a first-time buyer really wants to become a homeowner, there are several options and different ways to look at affordability.
When I was 22 years old, I decided that instead of renting I would buy a small duplex to live in, fix it up over time and collect a rental income to offset the cost of my mortgage. That is exactly what I did. Although prices were much lower, as a couple we only had around $11 000 as a down payment and were limited to buying a property with 10% down payment with a maximum purchase price of $110 000. Instead of waiting for a bigger and better property, we purchased the best property in the best location possible within the budget we had.
Montreal Real Estate prices have increased
Although home prices have increased, there are many options to get into the real estate market instead of waiting on the side lines and losing out on the appreciation of your propertyâ€™s value increasing while you live in it. The prices of condos are still low, and if you buy in a great location near transportation and services, this will give you a positive resale value which will help you move on to a single home. After 5 years of living in a condo, I have seen many young buyers keep the condo as an investment and use some equity to buy another property.
Different options to buy
Another option is to purchase a plex type property perhaps with 2 units. The rental income will not only help pay the mortgage it may also help to qualify for the mortgage. If you do not qualify on your own, consider paring up with someone. This will give you more buying power. First-time home buyers need to work with an experienced realtor who can offer them advice and strategies to start them off on the right foot. The idea of purchasing the perfect home as a first-time buyer also needs to be put aside. Stick to your budget and buy a property in the best location possible that can accommodate your lifestyle for at least 5 years.
Helen Akrivos is a Montreal real estate expert who is passionate about educating and inspiring everyone to succeed in real estate! President of North East Realties agency in Montreal and Chartered Real Estate Broker. As a lecturer in the Residential Real Estate Program at College Lasalle, Co-Host of The Real Estate Show on CJAD AM800 radio and contributor to the MTL Times newspaper, Helen shares her stories of real estate success to help as many people as she can! email@example.com