In recent years there has been a surge of discussion surrounding the challenges that Generation Y, or the Millennials, will be experiencing as they enter the work force. The key items of discussion are (a) Education Costs (b) Cost of housing - both important topics because they both heavily impact an entire generations ability to be upwardly mobile.
If we consider first the cost of education there seems to be a disconnect between the actual average amounts that will be owing at the end of a four year degree. If you look at the numbers presented by the Canadian Federation of Students debt will hover anywhere from $27,000 to $37,000. If you look at other sources the number hovers around $25,000 to $27,000 - anyway you look at it, those are some big numbers. Using the middle of the road number of $26,000 our student are accumulating debt at a pace of approximately $6,500 per year, or $541.67 per month.
It may not seem like much when you break it down to those simple numbers, but factor in interest rates, and repayment terms stretching over a decade, and it becomes a financial burden. All things being equal it is not necessarily the debt that poses the challenge, it is the dim employment prospects that make the debt seem insurmountable. With youth unemployment (under the age of 25) hovering at 13.40% it means that finding gainful, and well paying employment is at best a challenge. For most of the younger generations we are still playing the waiting game looking to the boomers to finally retire and open up opportunity that presents some upward mobility. The average income for a household in Canada, net of taxes, has been improving from $59,000 in 1993 to $79,600 in 2011 (We do not have current stats available to us since the government got rid of the long form census…). That does bode well for future generations, however there is still some catching up to do so incomes can keep pace with cost of living.
When you couple in the cost of housing however, it means that home ownership will present a larger challenge for the younger generation. With the cost of a detached home exceeding the million dollar mark in Toronto and Vancouver (The two hottest real estate markets in Canada) one has to wonder if owning a detached home is even on the horizon. For many it seemed that the condo market was a solution, it allowed people to own their own home while providing life style and affordability. That however is even being challenged by a condo market that continues to see escalated prices. So with all of this doom and gloom, what does it mean for future generations who are seeking to enter into the housing market? It means that there has to be a change in mind set in how we approach what is, for most people, the largest purchase they will ever make.
It also means that more than ever it is important to ensure we are seeking the advice of professionals. Not just for insurance and investments, but also when it comes to determining a sound home ownership plan. It means, that more than ever a mortgage broker can play a significant role in ensuring you are well positioned to make the most of your dollar when investing in the purchase of a home.
CENTUM Mortgage Advisors have been helping Canadians make Smart Home Ownership decisions for over a decade.
**Paul Therien is the Vice President of Operations for Centum Financial Group Inc. and has over 20 years of experience in the financial sector. He is a sought after public speaker and regularly talks on this subject and provides insights into housing as well as other socially relevant topics. In 2013 he was listed as one of the most influential people in the mortgage industry in Canada.**
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July 17, 2018
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