Written by J A, editor at CNN, in Toronto, Canada.
Nearly half of young people in Toronto, Canada, who are considering buying a home, report they have given up on ever being able to afford a house, according to a recent survey of 1,000 Millennials.
It’s the latest sign of the challenges many young people are facing. It’s also part of a broader problem in Canada. Canadians have been facing rising home prices over the past decade. The country’s real estate industry is experiencing a massive correction.
While prices and interest rates have taken a tumble recently, the market remains sensitive to a slowdown in economic growth. Real estate activity is key to Canada’s financial system because of mortgage and financing services, which account for most of its economic activity, according to a Bank of Canada report.
According to the survey, conducted by Royal LePage, 22% of all respondents said they considered buying a home this year but decided against it due to concerns about the market. Of those, 12% said they were considering starting a family, while 12% said they had been motivated by holiday plans and/or anticipating graduations.
While the Bank of Canada has historically kept interest rates at record lows for the past decade, they have recently begun to increase, with one of the Bank’s senior deputy governors recently saying “bond yields suggest we have got our nerve a little bit.”
The concern is the economy will continue to face struggles and the Bank of Canada will have to lower rates further. But Canada’s housing market remains fragile and the effect of a recession has yet to be felt by most, making predictions challenging.
In 2015, the most recent year for which data is available, the average price of a home in Canada was C$669,000, while the housing market had experienced an uptick in construction. Although overall household debt in Canada is currently near all-time highs, a high proportion of it is comprised of mortgage debt.
In Toronto, meanwhile, a median price of C$675,000 ($560,200) would come in at C$847,000, according to data from the MLS system. The city’s housing market has seen a number of record highs and prices have continued to grow even though the total number of transactions has declined.
New rules introduced by the Ontario government last spring, to be followed by federal regulation updates in 2019, have chilled the Toronto market, but are so far not having a significant effect on the rest of the country, with home sales continuing at a robust pace in the first half of 2018.