Millennials make up the largest generation of Canadians, representing a total of 27% of the population. This generation of Canadians serve an important role in the Canadian workforce and economy, in fact according to the Canadian Encyclopedia millennial’s are the most educated generation in Canadian history. However, despite being a well-educated and influential generation, millennials are faced with financial barriers that previous generations did not encounter.

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In 1976, a year where the majority of baby boomers were young adults, it took the typical first-time buyer 5-years on average to save for the typical 20% downpayment in the GTA. Now, it takes the first-time Canadian homebuyer an average of 27 years to save up for a 20% down payment, a number that has gone up three years since the start of the pandemic.With this in mind, it is no wonder why so many Canadians fear they will never be able to own a home, especially millennials. According to a study by KPMG, while 72% of millennials have the goal of becoming a homeowner, almost half (46%) feel that homeownership has become a pipedream.

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There are a number of significant barriers that stand in the way of homeownership for millennials, creating fear and uncertainty regarding one’s ability to own a home. These are the five biggest fears that millennials have about homeownership, and how this is preventing them from owning.

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1 . Rising housing prices

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There is no doubt that the price of buying a home remains the biggest barrier into the housing market. According to the RE/MAX 2021 Housing affordability report, 42% of Canadians stated that the price of housing was preventing them from getting into the market. With housing prices rising at a much faster rate than income level, more and more millennials fear homeownership is out of reach. In fact, the average national home price is now more than seven times the average household income, according to National statistics. And since the pandemic this gap has grown even more. Pre-pandemic, the average housing price in Toronto was around eight times household income, it is now 10 times the average income of Torontonians. This widening gap is leaving more and more millennials stuck on the rental treadmill, feeling further and further away from ever becoming a homeowner.

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2. Paying off student debt

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For many millennials this fear of affordability goes along with fears related to paying off student debt. Millennials are uniquely impacted by this as they hold more than double the amount of debt than any other generation. This puts them at a significant disadvantage when saving up for a downpayment, as many need over a decade to pay off these loans, with a large number of people still paying loans off into their 40’s.

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3. Becoming house poor

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Along with the worries surrounding paying off student debt, mortgage debt is among the top fears of millennials. For those who are able to save up for that recommended 20% down payment, the greatest financial obligation in their lifetime will be their mortgage debt. This is a growing concern among younger generations as household debt has continued to rise over time. For millennials their debt-to-income ratio lies at 216%-- surpassing both Gen-Xers (125%) and baby boomers (80%). With this in mind, and the growing gap between housing prices and income, it makes sense why the fear of becoming house poor looms over the heads of millennials. Learning about the mortgage stress test can help millennials and other young people know whether or not they hold the sufficient funds to be able to afford and pay off a mortgage.

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4. Unforeseen costs

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According to the 2021 Millennial Home Buyer Report almost half of millennials fear hidden costs tied to homeownership. While unforeseen and unexpected costs are something that many Canadian home buyers forget to consider, it can cost you a significant amount of your savings. Some of these costs include maintenance costs, home insurance, home inspection costs, legal fees and taxes.

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5. Not having enough saved for retirement

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The fears millennials have surrounding homeownership carry into their long-term saving plans. Many fear that if they are able to save up for a house, this will delay their retirement savings. In fact, 65% fear they will not be able to save up enough money for retirement. With rising housing prices, high levels of debt and so many barriers into the market, the bottom line is that millennials can’t afford homes.

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A new solution for homeownership

The challenges millennials face are real, but solutions are emerging to help overcome them. Key’s program is designed to help aspiring homeowners break free from the rental cycle and achieve ownership. With Key, you can start owning with only a 2.5% down payment and no immediate mortgage qualification required. Learn more about how Key's program works here.

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