The dream of owning a home is still very much alive among Canadian millennials, but when it comes to saving for it they are lagging.

A new poll of 18-37 year-olds by CIBC has found that 46% intend to buy a home in the next five years but 76% have yet to start saving or have saved less than a quarter of their down payment.

“Our survey reveals that few millennials are taking the necessary steps to make the move to homeownership,” says Grant Rasmussen, Senior Vice President, Mobile Advice, CIBC. “You can’t buy a home with intent and desire alone. It’s important to have a financial plan to make the most of your income and set yourself up with the right savings plan to achieve your goals now and in the years ahead.”

Four in 10 Canadian millennials currently rent and almost a quarter live with their parents with 94% of those intending to become homebuyers. However, 45% say they don’t believe it is realistic or desirable anymore.

More than a third are already homebuyers but 58% are concerned that rising interest rates will impact their ability to manage current household expenses.

“While most still dream of owning a home one day, higher house prices, the prospect of higher rates, and new qualifying rules are prompting some millennials to pause and question whether being a homeowner is realistic or even desirable for them,” says Mr. Rasmussen. “The key is to understand your total housing costs and start planning early so you can consider your rent versus buy options in the context of your overall financial plan and desired lifestyle.”

Although many respondents to the poll say that renting can be as expensive as homeownership, they are concerned about the costs of ownership.

But millennial homeowners manage to save more each month ($566 on average) than renters ($368) or live-at-homers ($360), and homeowners have amassed an average nest-egg of just over $60,600 – more than double that of their peers who rent or live at home.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage

Alaina Dyer

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Residing outside of the country, I did not know where to turn in looking for a place for my daughter and my cousin but you reassured me; guiding and including me each step of the way.   I  felt assured and confident that you had by best interest at heart.

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H. Alaina Dyer

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Since the start of last year, 17 projects have been cancelled in the GTA, according to real estate services firm Altus Group Ltd.

A parcel of land at the corner of Maplecrete Rd. and Highway 7 sits vacant. Liberty Development Corp. pulled the plug on a three-tower, sold-out condo development, citing problems with construction financing.

Builders in Toronto’s frenzied condo market are walking away from giant towers they have pre-sold, reflecting a rougher road to profits — and leaving buyers in the lurch.

Soaring construction costs and condo values in Canada’s largest city, where prices have surged amid a booming economy and strong immigration, have spurred developers to cancel projects they started when construction was cheaper and pre-sales were less lucrative. Condo prices have increased about 20 per cent since February of last year, according to the Canadian Real Estate Association.

“Many projects launched for pre-sales prior to having their proper approvals in place,” said Shaun Hildebrand, a senior vice-president at Urbanation Inc. “By rushing to bring units into a hot market, some projects jumped the gun and added risk to the development.”

According to Urbanation, which studies the Toronto condo market, there are 10,622 condo units in the Greater Toronto Area that were offered for pre-sale before 2017 and still await construction. Since the start of last year, 17 projects, with 3,627 units, have been cancelled in the region, according to real estate services firm Altus Group Ltd. That’s up from seven projects, with 808 units in 2016.

This month alone, Liberty Development Corp. pulled the plug on a three-tower, sold-out condo development, citing problems with construction financing. Liberty didn’t respond to an email seeking comment.

Bad timing

The threat of still more cancellations looms over Toronto, where housing is tight and expensive as it is. While the average price of a home was down 17 per cent in March from a year earlier, according to the Toronto Real Estate Board, the decline comes after a long run-up. To cool the market, the government added rules making it more expensive to borrow — pushing buyers into condos from even pricier single-family homes.

Typically, developers need pre-sales of at least 70 per cent to get financing to move a project forward, said Phong Ngo, director of data solutions at Altus. That isn’t their last hurdle. From there, the longer it takes to break ground, the higher the costs of materials and labour, especially as interest rates rise. Builders may face delays in getting government permits, finding contractors and workers amid the hot demand or parrying special-interest groups that oppose construction.

As of February, 143 condo projects that are at least 70 per cent pre-sold hadn’t started construction yet, according to data from Altus. Of these, 43 had hit the 70-per-cent mark more than a year earlier.

Construction costs in the Toronto area, which typically have risen in tandem with inflation, increased 6 to 8 per cent last year (compared with inflation of about 2 per cent), according to Altus. “We believe that going forward next year, it’ll be at least that or more,” David Schoonjans, senior director at the firm, said. At the same time, labour costs are rising, with hourly compensation up 2.4 per cent across Canada in 2017.

“At some point, the project stops making financial sense,” Schoonjans said.

It is in that environment that the Toronto region finds itself with 412 condo projects totalling 101,208 units in the works, Altus reports.

The rebound

In the end, “only a small portion” of condo buildings will be cancelled, said Lauren White, senior vice-president of the Land Services Group at CBRE Group Inc. “Therefore, the effect will be a minor tightening on supply as purchasers from cancelled projects move to active projects.”

Homebuyers who have had their projects scrapped will be back in the market again, increasing demand even further, said Mike Czestochowski, executive vice-president of the group.

That’s good for builders but a problem for buyers. Many who get their deposits back from the developer of a nixed project probably will have lost equity, because the market is a lot hotter today, Czestochowski said.

With the intense demand for housing in and around the city, many new projects are bound to rise and cancelled ones to be revived — at higher prices.

“We haven’t seen an increase in supply yet,” he said. “It would be hard to imagine what else they do with the site.”

Source :

Toronto Star

Research firm calculates that standard buyer better off renting as ownership costs have surged

The average cost to rent a condominium in the Greater Toronto Area has risen by almost 11 per cent in the past year partly because tougher mortgage rules have shut out new buyers and flooded the market with renters, a new report by research firm Urbanation says.

Urbanation calculates that the average monthly rent of a condo in the GTA has risen by $214 in the past year and is now at $2,206. In the city proper, the average rent is even higher — $2,432.

“Renters have started to gravitate toward less expensive options in the rental market, as evidenced by an increased share of leases for studio and one-bedroom-without-den units, which averaged rents of $1,640 and $1,907, respectively,” the report said.

A major factor in the rent surge is people being shut out from being able to buy. In January, new rules were implemented that make it much harder to get a mortgage. And the impact on Toronto’s condo market has been significant, and immediate.

“Renters in the GTA are facing very strong market forces that are pushing hard on demand while new supply remains stubbornly low,’ Urbanation’s senior vice president Shaun Hildebrand said.

Based on the most up-to-date data, Urbanation calculated that an “average” 714-square-foot condo in the GTA would cost $558,000 in the first quarter of 2018,

A year earlier, a buyer would have needed an income of $77,000 to purchase that average condo, based on mortgage rules at the time, and assuming the buyer could come up with a 20 per cent down payment.

Today, with higher prices and tougher rules, one would need more than $100,000 in annual income to buy the same condo.

While Urbanation’s data is bad news for renters, there is a silver lining in the numbers. Based on the company’s calculations, it’s a much better financial move to rent than to buy at the moment.

That’s because based on current mortgage rates and assuming the buyer can come up with 20 per cent down up front, that same average condo would cost  $170 more every month in ownership costs that it would be able to generate in rental income.

So a standard buyer on that theoretical condo would be under water every month, and banking solely on making up for it by selling for a higher price down the line.