Regulations, affordability hampering Gen Y buyers

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Regulatory hurdles and affordability are the major barriers to Generation Y to jumping into the housing market, says a recent Royal LePage survey.

Generation Y – those born between 1980 and 1994 – expressed a strong desire to own a home, but almost half (45.8 per cent) said that the new mortgage rules will affect their ability to purchase a home to some or a large extent.

“It has taken people out of the market, the new regulations,” says mortgage broker Joe Walsh of Dominion Lending Centres Bedrock Financial Group. “I don’t see a strong market, and I think we are at the end of a strong cycle.”

While interest in homeownership remains high, potential buyers from Generation Y face a number of regulatory and financial barriers.  Just under half of respondents (45.8 per cent) said that the new rules will affect their ability to purchase a home to some or a large extent. A much smaller proportion (20.8 per cent) of Baby Boomers was concerned about the effects of the recent regulatory changes to mortgages.

Home affordability was also seen by many as a major challenge, even for baby boomers. When asked, 72.4 per cent of Generation Y and 67.8 per cent of Baby Boomers agreed with the statement "I desire to own a property in my lifetime, but I am pessimistic about my ability to own a home because of the current house price affordability."

Gen Y British Columbians  were particularly pessimistic, with 86.1 per cent agreeing with this statement. Quebecers were more optimistic with 39.9 per cent disagreeing with this statement.

Down payments on real estate also represent a challenge to Generation Y homebuyers, many of who are entering the real estate market for the first time. Almost two-thirds (63.8 per cent) of Generation Y respondents plan to put down less than 20 per cent as a down payment on a new property.

The majority of funds for down payments from Generation Y homebuyers (an average of 67 per cent) will come from a combination of savings, RRSP contributions and gifts from family. On average only 27 per cent of the funds for a Generation Y down payment will come from a sale of the current residence. The trend is opposite for baby boomers, where almost three-quarters (73 per cent) of their down payment will come from the sale of their current residence.

  • Paolo Di Petta | dipettamortgage.com on 2013-03-21 10:14:30 AM

    I think affordability is the greater problem here. The regulations were put in place to cool the overheated market and to bring back prices to more sustainable levels.

    The fact is incomes haven't kept up with property values. Long amortizations in low rates reduced payments and artificially increased "affordability", but then competition heated up and artificial demand increased prices. Now that the rules have changed, the market should start to return to more reasonable levels. Short term pain for long term gain.

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