Millennials are finally thinking about settling down and buying a home. Many, though, are running up against the new mortgage rules that kicked in on Jan. 1.
The rules, essentially, require even borrowers who can afford a 20 per cent down payment on a house to show that they would be able to keep up with their bills if their mortgage rate rose by two percentage points.
For older or so-called “peak millennials,” Canadians between the ages of 25 and 31, the new standard means having to settle for a home that is around $40,000 cheaper than what they would have been able to afford in 2017, according to a new report by real estate giant Royal LePage.
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With an average salary just above $38,000, the most expensive home a typical, single millennial can hope to buy is worth just over $200,000 with the new rules, calculates Royal LePage. For a couple with a combined income of $76,000, you’re looking at a maximum homebuying budget of around $400,000.
The average Canadian home priced between $325,000 and $425,000 had 2.7 bedrooms, 1.8 bathrooms and 1,269 sq. ft. of living space – arguably enough for a young family.
But what $400,000 actually gets a young couple is strikingly different depending on location. Around Vancouver, they’d likely have to make do with a one-bedroom condo and living quarters of less than 800 sq. ft. In Halifax, they’d be able to buy a three-bedroom, three-bathroom home that’s more than twice as big. And in Moncton, N.B., the 20 per cent down payment they’d have to fork over in Toronto or Vancouver would be enough for a house.
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Here’s how the purchasing power of the typical millennial couple varies across the country:
Halifax
Among the larger cities examined in the report, Halifax offers by far the best deals for millennials.
Greater Montreal Area
Millennials have been flocking to Montreal, but the city isn’t what it used to be for young first-time homebuyers. High demand has pushed the price of many single-family homes out of the $325,000-$425,000 range, forcing house-hunters with this budget into condominiums, according to Royal LePage. This explains the steep drop in square footage between 2017 and 2018 of the typical home in the peak millennial price segment.WATCH: When to get a variable mortgage rate and when to choose a fixed rate
Ottawa
Toronto
Toronto is the only city that saw a material increase in the square footage of the homes associated with the $325,000-$425,000 price range, according to the report. Look at the numbers and you might think millennials might now be able to afford 40 sq. ft. more than last year.Unfortunately, though, the numbers reflect the fact that most smaller, downtown condos are now out of reach for young buyers with middling income. In turn, “this caused slightly larger properties in the north end of the Greater Toronto Area to have a greater weighting than in 2017,” Royal LePage told Global News.READ MORE: Canadians underwater – Where, exactly, rising interest rates may leave Canadians in danger of losing their homes
Winnipeg
Regina
Calgary
Greater Vancouver Area
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