Hey, Millennials! Let’s talk about your future. Where do you see yourself living in five to ten years? What about twenty to fifty years? Do you picture yourself owning your own home? You may need to reconsider your plans.
Millennials don’t stand such a great chance of owning a single detached home in their lifetime. Just in the past year and in the GTA alone, single detached homes during resale are averaging one million dollars (read: way too many dollars). The cost of single detached homes in Toronto increased by 26% annually and the passing of just a few years have made a major difference in the cost of housing within the city.
If you’re unclear what a single detached home is, we saved you the trip to Wikipedia, where a single detached home is defined as a “single-family detached home, also called a single-detached dwelling, single-family residence (SFR) or separate house is a free-standing residential building. It is defined in opposition to a multi-family residential dwelling.” (Wikipedia)
Now that we’ve cleared up what it is, let’s talk about how you’re probably never going to have one.
If you’re buying for the first time in the GTA, you’re likely part of the three quarters of first-time buyers who are not buying single detached homes. That’s right, only around ¼ of homebuyers are purchasing detached homes, and it’s no surprise that this is because they are so unaffordable. The inability to afford one will likely also impact your home ownership for the rest of your life. As the cost of homes go up and the square footage goes down, it’s very likely that you’ll either pay the same or more money for smaller and smaller spaces as the years go by.
Getting into the market now requires some serious cash. If you are already in the market, the increased value of your home likely won’t cover the cost to purchase a new home or the increase in your mortgage that it will take to get one. This likely isn’t the best decision as it doesn’t make sense to increase your mortgage by two or three times to get slightly more out of your space, if anything. Buyers are basically forced to choose between preferred housing type or preferred price point, with location also factoring into the situation in a huge way.
If you’re a millennial, you’re likely already struggling to pay rent (check out our blog about Toronto Bidding Wars for Rentals) and paying off student loans while raking in low wages at an entry-level job. The current financial situation of millennials plus the crazy housing market can make it impossible to own detached residences. Unless the market changes, this situation is not likely to improve.
You should also consider the fact that detached homes are starting to disappear in Toronto, as in many large cities. Unless a home has some sort of historical value, it’s very likely that it will one day be torn down to be replaced with a skyscraper full of offices or a condo building.
Discouraged yet? Well, don’t be. The best advantage that millennials have against this struggle is time. If you’re even considering the possibility of homeownership, you still have time to get on the right track.
Despite what most people will try to convince you, there is still hope for you! There are still options to help you purchase a detached home, if that’s the road you want to take.
Just as an example, you may want to consider taking a few extra jobs or having your parents loan you money, but unless you’re born to a wealthy family or don’t need to sleep these may not be possible options.
In regards to the home you purchase, there are compromises you can make. There is always potential to live a little farther from your desired location inside the city limits, especially with Toronto’s intricate transit system and the ability to choose from many different locations still inside the GTA. There is also the option of paying a little more for your home, because while this may seem like a pain right now, it will allow you to choose a property with more resale value, which will be crucial for you in the years to come. And, of course, you don’t need to purchase a detached home. There are other options available to you such as townhouses and condos that offer very similar lifestyles at a smaller cost.
Above all, the first step to getting to home ownership at all is planning. This means saving as well as putting together a financial plan to make your money work for you. When you’re ready to buy, you’ll be grateful you started planning early on. If you think homes are expensive now, just wait another five years!
…But seriously, do not wait another five years. Get on the right track now, and let us help you do it. If you want to talk about the state of the market, what you can or will be able to afford, or how to make the first steps to owning a home, let us know! The Raymond Yong Real Estate Group can be reached at (416) 906-9863, or for email inquires at [email protected].
