How to get into the housing market.
For millennial and generation Z Canadians, owning a home in this real estate market might seem like a pipe dream. According to the Canadian Real Estate Association, the average cost of a home in Canada was $665,850 as of June 2022 – a daunting figure for those still starting or establishing their careers.
Here’s a look at how out-of-hand house price increases have gotten in Toronto:
- Average Toronto home price in 2000: $243,255
- Average Toronto home price in 2010: $431,262
- Average Toronto home price in 2021: $1,095,336
First, to figure out how to achieve your goal of affording a house, you’ll have to know where you are starting from. Figure out how much of a mortgage you can afford today.
If that number is far from your goal of owning a property, here are some strategies you can try if you can’t afford the housing market right now.
Strategy 1: Save Aggressively or Longer
Saving more money is low-hanging fruit and a step you can take immediately. Budget carefully, and see what areas you might be able to save more on.
Focus on the biggest three household expenses of shelter, transportation, and food to see which area you might be spending too much on currently.
Or, you might not have to cut back on anything but just save for a longer period of time. If there is no wiggle room for saving for you at all, you’ll have to try another one of the strategies below to help figure out how to get into the housing market.
Strategy 2: Earn More Income
This strategy will be a bit tougher, but with the goal of owning a home as a motivator, you can focus on making more money and saving for that down payment. Maybe there is a company switch you can make that pays a higher salary, or a promotion in your current job that you can aim for.
We live in a more open economy than ever before, and there are countless options to earn some money in addition to your salary.
Consider taking your existing skills and trying to freelance them out, participate in the gig economy, or learn new skills and earn extra income that way. Ideally, you should try to aim to earn at least another $1,000 a month.
It’s good to set your earning targets high, because even if you only reach a few hundred a month, that will still help you reach your goal much faster. How to get into the housing market largely depends on your downpayment so this is very important.
Strategy 3: Expand Your Options
You might have to adjust how much house you want to buy, or where you want to buy it. Instead of that three-bedroom house near downtown Toronto that you were dreaming about, you might have to settle for a two-bedroom townhouse in the suburbs.
You can even consider moving to a different city altogether. There have been reports of people moving from places like Toronto to Alberta and being able to afford a house easily.
Strategy 4: Don’t Lose Hope
Many younger Canadians are losing hope of buying a property at all. I’ve been hearing things from my readers, such as “why bother saving? I’m never going to be able to afford a house anyway.”
There might be some relief around the corner for those looking to buy real estate. Home sales and prices are beginning to decrease in certain markets.
The government seems to be taking a more aggressive stance in curbing price growth with things like the vacancy tax for empty homes and foreign homebuyer tax in certain provinces.
The biggest factor will likely be interest rate hikes, which are predicted to be aggressive in the near future. If home prices decrease, it can occur very quickly. Be sure that you don’t lose hope and still have those savings ready so you can pounce on the opportunity.
Renting Isn’t All That Bad
Even if you can’t afford a house, it’s not the worst thing in the world to rent. Many people think that it is always better to own instead of rent. But, there are several advantages of renting versus owning.
Try not to spend more than 30% of your gross income (before taxes) on rent, which should give you a great opportunity to save up more.
If you’re a gen Z or millennial Canadian who can’t afford a house, try to be at peace with renting for now. Consider trying the strategies listed above, and hopefully in the future you’ll be able to afford the home you were dreaming about.
Looking to buy, sell, rent or invest? Let’s talk! I can be reached at 647.896.6584, by email at info@serenaholmesrealtor.com or fill out this contact form.
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