Originally Published: Insight – Market Updates
March 9th, 2022
A new generational trends report released today by Mustel Group and Sotheby’s International Realty Canada reveals that even in light of escalating costs of living and rising housing prices nationwide, an overwhelming majority of Generation Z buyers are self-reliant in saving for their first homes, and are employing diverse strategies to overcome financial obstacles to home ownership.
According to Mustel Group and Sotheby’s International Realty Canada survey results, 37% of urban Canadian Generation Z adults expect to purchase their first home in less than five years, while 43% anticipate buying between five and ten years from now, including nearly one-third (29%) who expect to purchase in five to eight years. 30% expect the purchase price of their first home to be $350,000–$499,999, while 26% expect to pay $500,000–$749,999. A previously released report by Mustel Group and Sotheby’s International Realty Canada had revealed that approximately half of this cohort state that their most likely first home purchase will be a higher-density housing type, with 25% reporting that their first home purchase will likely be a condominium, 18% saying that their first home will be an attached home/townhouse and 7% stating that their first home purchase will be a duplex/triplex. 39% reported that they are most likely to buy a single family home as their first residence.
Newly released findings reveal that the most common source of funds for their down payments will be personal savings, with 67% of urban Canadian Generation Z adults reporting this as a primary source. This is followed by a financial gift from family (25%), a loan from a financial institution other than a mortgage (24%), sale of financial assets such as stocks and bonds (18%) and receiving a family inheritance (16%).
The Mustel Group and Sotheby’s International Realty Canada “Financing the Future of Canadian Housing: Generation Z Trends Report” focuses on the financial strategies and sentiments of the country’s next generation of first-time home buyers as it relates to home ownership. It is the second in a multi-part report series based on Canada’s first in-depth study of the housing intentions, aspirations and preferences of Generation Z, and is based on a survey of 1,502 Generation Z Canadians who are over the age of majority and between the ages of 18 and 28 in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas.
“The influence of Generation Z is rising with each passing year, and their impact on Canada’s real estate market is set to be substantial,” says Josh O’Neill, General Manager of Mustel Group. “Results from this survey reveal the high level of confidence that young Canadians have in housing and demonstrate how they are overcoming financial barriers to attain home ownership.”
Of the personal and financial measures this group plans to take to save for their first home, the most common, mentioned by 51% overall, is to secure a full-time job with a higher salary. This is followed by reducing or eliminating personal spending (42%), earning extra income through a second job (41%), and reducing or eliminating eating out (37%). Other measures include living with family (30%), reducing or eliminating vacations (29%), delaying having a child (28%), and reducing or eliminating entertainment, health, or fitness expenditures (25%).
A noteworthy segment of Canada’s Generation Z is also anticipating an alternative ownership structure for their first home. While freehold, full ownership is the most likely structure for a first home purchase, reported by 41% of respondents, 24% of urban Canadian Generation Z adults expect to co-own their first home with family, while 13% expect to co-own with friends or other parties who are not family. Those living in Toronto and Vancouver are more likely to report that their first home will likely be co-owned with family or friends.
Across every metropolitan area, survey results also reveal a high degree of confidence in the real estate market. Overall, 83% of urban Canadian Generation Z adults agree that home ownership will play a major role in achieving a financially stable retirement, including 40% who “strongly” agree with this sentiment. 71% believe that a home purchase will perform the same (32%) or better (39%) than financial investments such as their RRSPs and TFSAs.
“Even though Canada’s Generation Z homebuyers are confronting significant housing affordability concerns, it is clear that they not only desire home ownership, but regard it as being integral to their financial security and planning,” says Don Kottick, President and CEO, Sotheby’s International Realty Canada. “Many amongst this resourceful generation are planning their first real estate move and are taking major steps and making considerable sacrifices to save for their first down payment. With one in three Gen Z adults expecting to buy their first home within the next five years, we can only expect the social, economic and political clout of this group to have a growing influence on the Canadian housing market.”
Market Highlights
Toronto
According to newly released survey findings from Mustel Group/Sotheby’s International Realty Canada, Toronto’s Generation Z adults are not only primed for home ownership, they are also deploying diverse strategies to overcome rising housing prices and affordability concerns to save up a down payment for their first home.
Even though the Greater Toronto Area’s MLS Home Price Index composite benchmark price for residential properties rose 33.3% year-over-year to a record high of $1,259,900 by January 2022, 36% of Generation Z adults anticipate buying their first home within five years, while 44% expect to buy a home in five to ten years, including 28% who expect to purchase in five to eight years.
13% expect to pay less than $350,000 for their first home while 23% expect to buy a first home priced between $350,000–$499,999 and 29% anticipate spending $500,000–$749,999. Notably, Toronto’s Gen Z respondents along with their counterparts in Vancouver, are more likely than those living in Calgary and Montreal to anticipate paying more than $750,000 for their first home: 19% expect the price of their first home to be between $750,000 and $999,999, while 16% expect to pay $1 million or more for their first home.
Like their counterparts across the metropolitan areas surveyed, Toronto’s Generation Z reflects a high degree of self-sufficiency when it comes to saving for the down payment for their first home. An overwhelming 70% of survey respondents say personal savings will be a primary funding source for their down payment. The next most frequently cited down payment funding sources are a financial gift from family (reported by 27%) and a loan from a financial institution (26%). The sale of financial assets and withdrawal from RRSPs are reported by 20% and 16% respectively.
The most common personal and financial strategy this group plans to take to save for their first home is to secure a full-time job with a higher salary, reported by 55% overall. This is followed by reducing or eliminating personal spending (47%), earning extra income through a second job (42%), and reducing or eliminating eating out (37%). Other strategies include living with family (35%), reducing or eliminating vacations (31%), delaying having a child (29%), and reducing or eliminating entertainment, health, or fitness expenses (29%).
Like their counterparts in Vancouver, Generation Z adults in Toronto are more likely than those living in Montreal to report that they will likely co-own their first home with family, with 26% citing this as their most likely ownership arrangement. Another 12% expect to co-own with friends or others who are not family. Despite these alternative models, freehold, full ownership remains the most anticipated ownership structure for Toronto Gen Z’s first home purchase, reported by 39%.
84% of Generation Z adults in Toronto also report that home ownership plays a major role in their plans for a financially stable retirement, including 41% who “strongly” agree with this sentiment. Confidence in the future performance of the housing market is also high, with 73% believing that a home purchase will perform the same (33%) or better (40%) than their financial investments.
The report is based on findings from a survey employing an online methodology using a robust panel of 1,502 Generation Z adults between the ages of 18 and 28. in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas (CMAs). The panel is maintained to be representative of the Canadian population and provide high-quality data. Panelists are recruited by a double opt-in method from large databases of reputable channels using industry standards of panel quality assurance, validation, verification and best practices for panel management. The sample was weighted to match Statistics Canada census data based on age, household income and home ownership within each CMA and to bring the total sample into proper proportion based on relative populations. While margins of error only apply to random probability samples, the margin of error on a random probability sample of 1,502 respondents is ±2.5 percentage points, 19 times out of 20, and ranges from ± 4.5 to 5.4 points for 325 – 476 respondents). Data for this report series was gathered from October 25 to November 10, 2021. Please note that percentages cited may not add to 100% due to rounding.
Full Generation Z Trends Report – Linked here
*Disclaimer
The information contained in this report references survery results, plu smarket data from MLS boards across Canada. Sotheby’s International Realty Canada cautions that MLS market data can be useful in establishing trends over time but does not indicate actual prices in widely divergent neighbourhoods or account for price differentials within local markets. This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information and analysis presented in this report, no responsibility or liability whatsoever can be accepted by Sotheby’s International Realty Canada, Sotheby’s International Realty Affiliates or Mustel Group for any loss or damage resulting from any use of, reliance on, or reference to the contents of this document.
