Everyone knows that it’s not easy for most millennials to buy a home in Metro Vancouver. But it’s far from an impossible dream, according to four local homeowners born in the 1980s and 1990s, if people are willing to make some significant sacrifices in their lifestyles.
Sitting in the Truffles Fine Foods across the street from New Westminster Station, Tej Kainth expressed relief that she made the decision to take the plunge not long after her 30th birthday. “I really felt it was time for me to get into the market, and you have to plan for it,” Kainth said. “So I worked very hard and saved up.”
As the executive director of Tourism New Westminster, she’s had a front-row seat to the transformation of the Royal City’s downtown over the past few years. It’s reflected in the creation of Westminster Pier Park, new conference and performing-arts facilities inside the Anvil Centre, and hip restaurants like Wild Rice, Longtail Kitchen, and El Santo.
In 2012, the Salient Group was converting part of a heritage block on Columbia Street into the new Trapp + Holbrook condo tower, which wasn’t going to be completed for two to three years. So when Kainth, who was single, bought a two-bedroom unit that year, she knew she had plenty of time to prepare before she moved in. She already had a 10-percent down payment; to get to 15 percent, she borrowed from her mom and dad.
Kainth began repaying her parents in regular increments while she was still living in their home.
“So when I moved in 2015 and when I was finally on my own, I was used to a good chunk of my paycheque going toward a mortgage,” Kainth said.
It’s young buyers like Kainth that Wesgroup Properties is hoping to lure two stops eastward on the SkyTrain line in New Westminster’s Brewery District. It’s a master-planned community around Sapperton Station, anchored by Royal Columbian Hospital and TransLink’s head office.
Wesgroup’s senior vice president of development, Beau Jarvis, told the Straight that the company first built up a commercial presence, bringing in Save-On-Foods, Starbucks, Shoppers Drug Mart, and Brown’s Socialhouse. The first 114-unit residential building, the Sapperton, sold out. Wesgroup is developing a 240-unit building called the Columbia, targeted at millennial buyers.
“They can just hop on the train and head to Vancouver, head to Burnaby, wherever it is they need to go for work and play,” Jarvis said. “We’re the best concrete-construction value on transit north of the Fraser.”
Kainth acknowledged that she’s had to make sacrifices to cover strata fees and other expenses for her New West condo by not eating out as often as before and paying close attention to her budget. But that’s offset by the joy that comes from hosting friends in her home. And because she can walk to work and stroll back home in the middle of the day, she rarely uses her car, saving money on gas and parking.
“I’ve got this beautiful view overlooking the river,” Kainth said. “I enjoy my lunch on the patio.”
Kainth wasn’t alone in getting a boost from her parents. Real-estate marketer Bob Rennie told the Straight by phone that “well over 50 percent of our first-time buyers are getting help from parents and grandparents.”
“Millennials will find their affordability in the region, not in Vancouver,” he stated.
He noted that one Rennie Marketing Systems millennial buyer moved back home with his parents and rented out his place on West Pender Street while he saves for a bigger place. “Another one sold their place in Burnaby, moved in with their parents, and is now looking to move into False Creek,” Rennie added.
He pointed out that baby boomers often moved out of their parents’ homes at very young ages, but that’s not as common with millennials. Another difference: millennials are far less likely to be hooked to the automobile than preceding generations.
“We’re advising developers to not even build one-bedrooms unless they’re on transit or in close proximity to transit,” Rennie said.
Samson Tam is one of those young homeowners with easy access to the SkyTrain. At the ripe old age of 27, he’s already onto his second home after buying a presale unit in Onni Group’s Block 100 project beside Main Street–Science World Station.
Raised in Coquitlam, Tam moved to Ontario, where he obtained an engineering degree. He told the Straight by phone that during paid co-op terms in university, he saved as much as he could, with the goal of buying a home. Once he found a permanent job in Toronto, he bought a small place after his parents provided a loan for the down payment.
“I had the mortgage to pay and I had to pay my dad back every month, too,” Tam recalled. “For the first two years of the mortgage, it was really, really rough. My chequing account was never over $1,000.”
After gaining some work experience, he was hired as an engineer back in the Lower Mainland. Based on advice from his parents, he immediately bought a 660-square-foot unit in Block 100 and saved as much as he could while the project was under construction.
He advised other young people without liabilities to sock money away if they’re living rent-free with their parents.
“People are blowing so much money on expensive dinners, weekend things, and partying,” Tam said. “I don’t know how anybody my millennial age should be driving a $50,000 car. It’s not even an investment; it’s a toy. I drive a used Honda that my mom sold me for $4,000.”
Another young Vancouver homeowner, 31-year-old consultant and part-time banker Samantha Stewart, told the Straight by phone that she originally wanted to buy a place in the downtown core. But after extensive market research, she concluded the best option was a two-bedroom resale in the Fraserhood area for well under $400,000. So she “pulled the trigger” about two years ago.
She noted that the extra room will come in handy if she decides one day to get married and have a child. “When you have a mortgage, it really commits you to Vancouver,” Stewart acknowledged. “You can’t fly away for a three-month vacation in Thailand.”
Like other millennials contacted by the Straight, Stewart received help from her family for a down payment. This has kept her monthly mortgage payments around $1,400, which is only slightly higher than what she used to pay in rent for a basement suite.
Another millennial homeowner, 25-year-old ecommerce specialist Rita Lee, is moving with her 25-year-old boyfriend into their first condo on Friday (October 21). She told the Straight by phone that her parents instilled in her that it was very important to get her name on title and own property.
“The idea of renting was never a part of my goal, never a part of my reality,” Lee said. “It was save up and save up until I could buy myself a home.”
The couple’s real-estate agent told them that they could buy a bigger place along Kingsway, but they preferred to purchase a 600-square-foot unit in Gastown because they love the neighbourhood so much. Lee said that because the market was so hot, they had to submit bids quickly or else they would have missed their chance.
“When I was looking into buying a home, I thought it would be easy—find your 20-percent down payment—but there are so many other things just to get started,” she said. “We had to go completely subject-free, which means that we had to make sure that all of our finances were in place.”
Recent changes to mortgage rules have upped the ante for first-time buyers. This month, the federal government declared that anyone with a down payment of less than 20 percent of the purchase price will only obtain government-backed mortgage insurance under this condition: they must qualify at whichever is higher, their contracted rate or at the Bank of Canada’s five-year fixed rate.
By the end of November, all homebuyers, regardless of down payment, will face a “mortgage stress test” before being able to qualify for mortgage insurance backstopped by Ottawa.
Under the new rules, no more than 39 percent of household income can be allocated for gross debt servicing (mortgage payments, heat, and taxes). The total debt-service ratio (carrying costs and other debt payments) must not exceed 44 percent of household income.
Rob McLister, a mortgage expert who writes for the Canadian Mortgage Trends website, has claimed that this will stifle demand for new homes. “Many young buyers will now be riding the pine until they scrape together a bigger down payment, get a raise, settle for up to an ~18% cheaper home or find a co-buyer,” he wrote.
The new mortgage rules could have an impact on prices, given the large number of millennials in the region. According to a recent paper by demographic expert David Baxter, there were 373,746 people between the ages of 25 and 34 living in Metro Vancouver in 2014-15.
Meanwhile, housing prices may already be on the decline after months of sagging demand. The B.C. Real Estate Association recently reported that in September, the average Multiple Listing Service price for residential properties in B.C. was $585,844. This was off 3.2 percent from September 2015.
Although it’s tempting to time a housing purchase to get the best deal, this tactic is not endorsed by young homeowner Tam. He said that housing was expensive when he bought his first condo in Toronto and remained high when he purchased his second home in Vancouver.
“The right time to buy is when you can afford it,” Tam recommended. “If you can’t afford it, then don’t do it. That’s just the reality. If you’re stretching yourself putting down five percent at a ridiculous interest rate, that’s not affording.”
He has a dog and a steady girlfriend, and he said his condo suits his needs. And he’s not concerned about whether residential real estate suffers a correction, because he’s “not a house flipper”; he’s in it for the long term.
“If it comes down a little bit, more people will get into the market,” Tam predicted. “Fifteen years from now, house prices will be up.”
With files from Carlito Pablo.