Millennials set to drive change in real estate market
Story By: Susan Pigg | Thestar.com
They will be a force to be reckoned with as they move into child-bearing years and need more space, observers say.
They have the potential to be the biggest home-buying cohort in history — even bigger than their baby boomer parents.
But where Canada’s millions of millennials will end up living, and how they will impact the real estate market, has just started to play out.
The first wave — boomers’ kids who range in age from 15 to 34 and make up about one-quarter of Canada’s population — are just moving into their prime home-buying years. Many live in Toronto and Vancouver, where job growth has become a major magnet.
Already, those fortunate enough to find a decent, dependable job, rather than just contract work, have been helping drive competition for starter condos and single-family homes.
“Affordability will play a huge factor in who buys what,” says Dana Senagama, principal GTA market analyst for Canada Mortgage and Housing Corp., which has surprisingly little data so far on how the might of the millennials is being felt so far.
“They’re going to be a force to be reckoned with over the next decade, especially as they move into their prime child-rearing years and will need more space.”
Even the Toronto Real Estate Board, which assesses the state of the GTA resale market twice a month, seems to know little about the buying intentions of millennials. It’s set to launch surveys of the sector in the new year.
One thing is clear so far: Millennials have had a huge impact on the GTA rental sector because of their willingness to pay a hefty price — on average about $1,800 a month — to rent sky-high new glass-and-granite condos an easy walk from work.
That’s helped fuel the unprecedented condo boom in the GTA, especially in the downtown core where, despite thousands of new suites on the market, the rental vacancy rate remains below 2 per cent.
With the average resale price of even a Toronto condo now inching toward the $500,000 mark, developers are starting to shift their sights to building rental units, anticipating that many millennials will be renters for life.
“Millennials have much less of an attraction to owning a single-family home and a car. They’ve got much more of an attraction to a lifestyle and a job,” says James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business.
“And many of them, especially in the United States, have become skeptical of this notion of a house as an investment.”
But with 1.5 million millennials in the GTA region alone, they’re likely to keep sending shock waves through the housing market, just as their parents did before them.
“There’s a shifting sensibility around how we define home,” says Toronto developer Mazyar Mortazavi, whose company, Tas DesignBuild, is now focusing on midrise condo projects in neighbourhoods just outside the core.
“Millennials and the subset before them, the late 30-somethings, are probably the first generation of people who are living their early adult life in urban centres. For them, home has more to do with being part of a complete community than it did in their parents’ generation, when it was about having a backyard, a picket fence and a two-car garage.”
It’s a pleasant fall evening and a crowd is crammed into a Roncesvalles storefront for what looks like an art gallery opening.
Wine is flowing. Finger foods are flying off the plates and a security guard has been hired for crowd control.
Canny and Nicholas Ng, both 28, are among the many millennials, some accompanied by their parents, who are here for what is, in reality, one of the oddest lotteries of their life — a chance, if their name is drawn, to buy a yet-to-be-built condominium townhouse in one of Toronto’s most up-and-coming neighbourhoods.
There is a buzz in the room until word starts getting around that some 2,000 folks have registered for the first crack at just 57 homes.
“Only in Toronto would you have a lottery to buy a condo,” says one woman who’s among the first in line, but leaves less than 15 minutes after the doors open.
The big crowd is understandable, given that prices — on paper at least — start at just $477,000 for stacked townhouses with about 750 square feet of living space. But prices climb quickly to the $800,000-and-up range for a more livable 1,000 square feet, especially when upgrades like a $7,500 locker and a $45,000 parking space are factored in.
The fact that a detached house in the city now averages more than $1 million has made townhouses and semi-detached homes the hottest tickets in the GTA for young buyers — and especially young parents — hoping to escape highrise condos.
The Ngs have just started visiting new-home sales centres, hoping to move up into a house from a downtown condo. But, like many millennials, they still have a basic debate to settle.
Nicholas thinks the suburbs offer better value. Canny prefers the shorter commute times in the city.
“We’re fighting a bit about where to live … struggling … discussing,” says Canny with a laugh.
The couple take a pass on the lottery and continue their search.