VANCOUVER (NEWS 1130) – How would you choose to spend $160,000: a 20 per cent downpayment for a home in Metro Vancouver or the outright purchase of house in Moncton, New Brunswick?
A survey from Royal LePage explores how peak millennials — aged 25 to 30 — are dealing with the region’s affordability crisis as their buying power takes a hit.
“The implementation of the OSFI stress test as of January 1 essentially shaved off purchasing power as a result of buyers having to be approved at a higher interest rate,” says Adil Dinani with Royal LePage West Real Estate Services.
Before the new stress test, individual peak millennial purchasing power with an annual salary of just over $38,000 would be a maximum of $243,000. After the stress test, it dropped to $203,000.
Dinani suggests that is a big challenge for young, first-time homebuyers in Metro Vancouver’s market — even when pooling money as a couple — so, they are compromising on geography.
“There’s a migration east and the areas that are attracting the most millennial buyers are those that are transit-connected and offer urban amenities in a suburban environment,” he tells NEWS 1130.
“You have areas like Brentwood Town Centre, which is a 17-minute train ride from the city core. And you have Metrotown Town Centre, where you can get all your daily conveniences — go shopping, go to cafes and restaurants. That narrative continues into the Tri-Cities as well, with the implementation of the Evergreen Line.”
But even so, the Royal LePage survey finds peak millennials can expect 12 per cent less living space on average in Greater Vancouver compared to last year.
“If you break it down, about $425,000 will get you a one bedroom, one bathroom place that’s approximately 700 to 750 square feet,” says Dinani. “If you look at Halifax, you’d get a three bedroom three bathroom detached home that is anywhere from 1,700 to 1,800 square feet.”
In an even more stark contrast, Royal LePage finds a peak millennial can outright purchase a home in Moncton, New Brunswick for the cost of the 20 per cent down payment on a home in the market segment accessible to them in Greater Vancouver.
Dinani says first-time buyers are also finding themselves increasingly competing against investor-buyers looking for condominium developments.
“When coupled with entry-level home prices — which now rival most two-storey values in other parts of the country and are continuing to rise, thanks to the region’s strong economy — these purchasers are trying everything they can to get into the market before prices move out of their reach,” concludes Dinani.
“From what we are observing, the majority of purchasers within this age range are getting assistance from their families to find enough money for a down payment on a starter home.”