Last year’s mortgage rule changes are clearly impeding young buyers from breaking into the housing market, according to one veteran, but there is an even larger obstacle in the way.
“One of the things that came out of the report was millennials impression that the government’s actions relating to restrictive actions to mortgage insurance was an impendent,” Phil Soper, president of Royal LePage, told MortageBrokerNews.ca. “Yet, I’d say a larger impediment was 20% year-over-year price appreciation” that had occurred prior to the mortgage rule changes.
According to Royal LePage’s most recent report, 49% of peak millennials believe the federal government’s mortgage regulations have impacted affordability.
As a result, they have been forced to consider lower-priced homes.
“When looking for a home, 53% of peak millennial purchasers across Canada are willing to spend up to $350,000, which would typically buy them a 2.5 bedroom, 1.5 bathroom property nationwide, with 1,272 square feet of living space,” the report reads. “Yet, with 58% of respondents having a annual household income of less than $69,000, and only 34% currently tracking to have a sufficient down payment of over 20 % to qualify for a mortgage in this price range, the actual logistics of homeownership can be quite difficult.”
The study also found 61% of millennials prefer to buy a detached home but only 36% believe that wish is realistic.
“In addition to high home values, peak millennials also face increasingly stringent mortgage stress test regulations, which push potential buyers to the sidelines, electing to either remain in the rental market to save up enough money for a down payment, or move to more affordable regions,” the report reads.
“When asked, 64% of peak millennials currently believe that homes in their area are unaffordable, with a significant proportion of respondents in both British Columbia (83%) and Ontario (72%) asserting that prices are simply too high. Of those that do not believe they will be able to own a home in the next five years, 69% stated that they cannot afford a home in their region or the type of home they want, while roughly a quarter (24%) are unable to qualify for a mortgage.”
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