Why Homeownership Should Be a Priority for Millennials

Posted by under Ask the Pros

Millennials may be known as the “rent generation,” but many would like to get into the real estate market—just on their terms.

According to a recent BMO poll, 89% of millennials agree there’s value in owning a home, but they’re not in any hurry to buy. 70% would rather wait until they can get the home they really want. In fact, only a quarter (26%) of millennials said they are very likely to buy a home in the next year.

60% of millennials say they’re tired of renting, so what’s keeping them from taking the homeownership plunge? Two-thirds (66%) of millennials say they have other financial priorities more important than real estate:

  • 42% would like to travel, go back to school or start a business
  • 38% are worried about being “house rich, cash poor” with little disposable income
  • 31% say paying down debt is a higher priority

Home prices may be rising in big cities like Toronto and Vancouver, but that’s not pushing millennials into the real estate market. Three-quarters (73%) of millennials don’t feel pressured to buy a home any sooner.

The danger of sitting on the sidelines

Homeownership is likely the single largest financial transaction in your lifetime. While you shouldn’t rush into the real estate market until you’re financially ready, you face another risk by waiting: you could find yourself priced out of the market.

Real estate prices are rising a lot faster than wages. In 1970, it took the average Canadian 200 weeks of work to save for a home. Fast forward to today and it takes double that. In fact, in the last 12 months alone, the average price of a home in the GTA grew more than $100,000.

Although homes aren’t likely to keep rising at this rate forever, if you wait too long you might no longer be able to afford a home in the GTA. Therefore, that’s all the more reason to buy a property in Toronto and start building up equity. With pre-construction condos, you can get in at today’s real estate prices and benefit from the appreciation in the coming years.

Why real estate is still a good investment

There seems to be this notion that buying a home in big cities makes no sense and that you’d be better off renting. While it may be better to rent in certain situations, many times you’re better off buying. Here are three solid, unchanging reasons to invest in real estate:

  • A home forces us to save and build equity. When you’re renting, you’re paying the landlord’s mortgage.
  • When you buy a home, you’re borrowing good debt. You’re investing in an asset that is likely to go up in value in the coming years, and will definitely increase in value over a long period of time.
  • A home isn’t just a place to live; it’s a good way to earn extra income. By buying a home with an income suite, your tenants can help pay off your mortgage sooner.

If you hope to own a home, there’s no time like the present to start saving. Keep in mind that you need at least 5% as a down payment for any home purchase, so putting even a small amount away each month beginning today is best. Set up a dedicated savings account and start saving towards your first home (and possibly your dream home!) today.

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About Sean Cooper

Sean Cooper is a personal finance expert and financial Journalist. His articles have appeared in major publications, including the Toronto Star, the Globe and Mail, and MoneySense. He is the author of the upcoming book, Burn Your Mortgage: A Simple, Powerful Path to Financial Freedom. Follow Sean on Twitter @SeanCooperWrite and check out his website, SeanCooperWriter.com.

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