May 27, 2016

MILLENNIALS looking to divide and conquer the housing market

Fotolia_105123774_Subscription_Monthly_XXLMore young Canadians are considering a home purchase with a friend or family member

MORTGAGE MATTERS
By  KEVIN LUTZ

Millennials are showing a marked increase in their desire to buy a home, according to the 23rd annual RBC home ownership poll. A total of 43 per cent of 18- to 24-year-olds who responded said they are considering purchasing a home in the next two years, up from 34 per cent in 2015.

Young buyers are also significantly more likely than others to consider purchasing a home with a family member (24 per cent versus 13 per cent for the general population) or with a friend (24 per cent versus nine per cent of the general population).  Among young Canadians, 76 per cent believe that home ownership is a good or a very good investment.

“For many millennials, home ownership is a natural part of their journey and we’re seeing the next generation eager to get into the market, even if that means exploring alternate options like buying with family or a friend,” says Erica Nielsen, vice-president of home equity finance for RBC.

The poll showed that 29 per cent of Canadians are thinking of buying a home within the next two years, up four percentage points over 2015. People living in B.C., Alberta and Ontario are most likely to be considering a purchase.

To get closer to the goal of owning their ideal home, buyers are taking more steps to ensure they are prepared. A total of 34 per cent of first-time home owners looked at more than 10 homes before making a purchase. Buyers are taking the time to find the right property — 36 per cent of buyers say this is their biggest challenge, followed by 22 per cent who say that deciding how much they can afford is the most difficult factor.

“Buying a home is often about compromise and home buyers should go into the process with a clear picture of their absolute must-haves,” says Nielsen. “Set your priorities, but be realistic and flexible. All parties should be on the same page, know their needs and get the best property for everyone’s lifestyle.”

Here are some tips for home buyers considering a purchase with a friend or family member.

Get on the same page: Open a dialogue on your absolute must-haves. There will likely be some different items on each of your lists, so work together to come up with one list on which you can both agree.

Stress-test for affordability: Try out different financial scenarios to see how much you can really afford. Talk about what would happen if one of you lost your job or had a change in financial circumstances and come up with a plan.

Get it on paper: Create a simple agreement that outlines your arrangement, including what costs each party is responsible for. Don’t forget utilities, maintenance and moving costs. You both might agree on how to handle the home purchase in theory, but life and relationships change, so having a contract in writing is the key to solving disputes in the future.

Have an exit strategy: Include in your agreement how you will deal with the property if one party would like to sell.

 

Kevin Lutz is RBC Regional Sales Manager,
Residential Mortgages
@RBCKevinLutz

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