will-future-middle-class-buyers-become-permanent-renters

Unless you’ve been living under a rock or have absolutely no interest in real estate, then you may have heard that home prices, in certain cities around the world, like Toronto, are becoming increasingly expensive and increasingly out of reach for many buyers. If you bought years and years ago, you are likely patting yourself on your back for your clever purchasing choice with better returns that the best RRSPS the Wealthy Barber could ever deliver. Of course, there is a chorus of people that have been saying that we are due for a correction. And I am not here to say whether these people are right or not. But what if there is no significant correction? What if this kind of market of home price increases continues? An interesting report came out of the UK that paints a rather dismal picture if you have not bought any property or if you are concerned about those who want to buy in the future. This report has projected that those 18 to 33 years of age will largely become permanent renters and that home ownership will increasingly becoming the domain of the well-off and the elderly. To put this into perspective, in 1998 more than half of people aged 16-34 living in household with incomes between 10% and 50% of the national average were buying their now homes. By 2013-2014 that dropped to 24%. By 2025, it is projected that only 10% will be able to own property. In London, it is forecast to be just under 5%. I know. Pretty grim and not entirely fair to the young. And I know what many Torontonians are thinking: Could this happen here? We have been reminded almost every week of just how much real estate prices have soared in Vancouver and Toronto. So, I suppose it is feasible, particularly when it comes to houses, which are in limited supply. So, what is a first time buyer to do? Here are a few suggestions:

Condo it up. If you need space try an older condo you can fix up when you have more money. Yes, your maintenance fees will be higher, but you will have more space per square foot.
Buy a duplex with someone else. It’s not an ideal solution. You would really need to have trust that person or couple with whom you purchase a property. But it does make things more affordable.
Go where the houses are cheap. If you just can’t do a condo and you need a house, then head to Hamilton. Excellent stock of houses and still cheap. Yes, it’s far away, but wow, you get more space! And the more people that go there, the better and more frequent the train routes will need to be. There is amazing Victorian housing stock and amazing conversion projects in Hamilton. If you do not want to leave Toronto, there still are pockets of Toronto neighbourhoods where a house could be purchased with the right budget.

Of course, there are is a lot of things that can be done around property that the government could work on as well. I’m not thinking of more rules that will restrict who can buy and what kind of down payment they need, but I think there could be a lot more success if we create a better way to move people throughout the city. As Toronto increases in size, we will need to see an overhaul of our transit structure that connects Durham Region to Hamilton to Barrie. If I really dream big, we would have high speed trains that would connect outlying regions to the city. In all honesty, I don’t believe we are on the same trajectory as the UK. I do believe properties will cost more in the future, but with a little creative and civic planning we could keep some affordability in the Toronto sphere.

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