Millennials (born between the early 1980s and early 2000s) are entering their prime home buying years. They should be dominating the real estate market, right? However, the millennial impact has been somewhat delayed, as high real estate costs and significant student loan debt push the ability to afford a home to a longer-term timeline.
However, millennial demand is growing in Toronto and Vancouver -- Canada's biggest cities -- and realtors there are now frequently approached by this age group as they look to buy their first homes. This likely heralds the start of greater millennial influence on the market. But what are millennials looking for, and how will they impact the overall market? Here's a look at a few attributes that make millennials a unique buyer group.
Millennials listen to their parents
According to the CMHC First Time Home Buyer's Survey, 34% of millennials interviewed said that family had the biggest influence on their buying decision.
That isn’t surprising to many realtors who see parents joining their millennial clients at open houses all the time.
Leslie McDonnell, a real estate agent with ReMax in Vancouver, said that boomer parents probably play such a big role since they are driving a lot of millennial buying.
“Many of the baby boomers are cashing in on the detached homes they have had for many years and they take part of their newfound wealth and give it to their children to purchase their first home.”
Eliana Sutton Balaban, a realtor for the Sutton Group in Toronto, agreed.
“Most millennials are relying on financial family help in some form. Often this comes with very heavy input from family," she says. "A bad review from parents, or other involved family members can disqualify a house completely.”
Downtown and suburbs are both in demand
You often hear in the media that more millennial buyers are choosing to live in cities but the agents we talked to cautioned that this doesn’t mean that millennials are abandoning the suburbs.
“The media often focuses on this trend towards downtown condo living because it's relatively new. But there is still a significant portion of millennial buyers who prefer to live in the suburbs,” said John Pasalis, president of Realosophy, a Toronto real estate brokerage.
Still, Pasalis admits that, “many buyers in this age group are valuing location and lifestyle far above the size of their home. This preference is really what's driving the demand for Toronto's condo market.”
In Vancouver, McDonnell sees a similar trend.
“Many buyers would like to be in the city or in a nearby neighbourhood.”
What’s unique about millennial condo buyers is that they are no longer just single professionals without kids.
“Many couples with young kids are finding a way to make condo living work for them and their family,” said Pasalis, “What they are losing in space they are gaining in lifestyle by eliminating the two hour round trip commute.”
When they are heading to the suburbs of Toronto, millennials are often buying townhomes or moving farther away in order to be able to afford detached homes, said Pasalis. But in Vancouver, McDonnell claims she has yet to sell a detached home to a millennial client.
“I have sold some millennials homes in the suburbs in the past, and even still, we are purchasing townhomes or condos,” she said.
Millennials want ready-made and renovated homes
It might not be a surprise to many that millennials are a visual generation.
As Balaban put it, “Millennials are the generation of Pinterest and Instagram, 'Property Brothers' and 'Love it or List it'. I’ve seen millennials value stainless steel appliances and hardwood floors over a new roof and eaves.”
She thinks that this is partly because of a difference in demographics.
“Millennials are not typically as handy as previous generations and therefore look for renovated product.”
Pasalis agrees but suggests that this might also be connected to millennials’ meagre budgets.
“Most millennial buyers are looking for homes that are pretty much in move-in condition,” he said, “Because most are first-time buyers, they rarely have the funds available to buy a home that needs a complete renovation.”
Other things that motivate millennials
While the location and condition of the property are the two main motivators, realtors also identified a few other things that top millennials’ lists:
- Low maintenance fees are a key driver for many budget conscious millennials. According to Mark Savel, a sales representative with Sage Real Estate in Toronto, “Almost every client gives a stark warning that they don't want to buy into a building with crazy high fees.”
- Acess to transit is also a top motivator. Savel also suggested that transit is key and that millennials will choose not to look in areas that are disconnected from transit.
- Rental suites are seen as a value-add for those buying detached homes in the suburbs. Basement apartments are a key driver of affordability which makes houses with income potential particularly attractive to millennials. “Many people have come around to the idea of becoming landlords, to help with mortgage payments. A basement apartment has become a desirable feature in a house, as it can many times afford millennials a larger or better property,” said Balaban.
How millennials are affecting the market
The biggest way that millennials are currently affecting the market is in new construction. Builders are catering to them, especially when it comes to condos.
“Condo builders have started to focus a bit more attention on building units that are geared towards end users rather than investors. This means slightly larger units with more functional layouts,” said Pasalis.
Similarly, suburban builders are “building a mix of housing types which allows buyers to buy more affordable town houses in some of the more expensive suburban cities,” he said. “They are also building further out of the city for buyers who have a strong preference for a detached homes.”
Balahan believes that, “demographically millennials should keep the market afloat. They are at the buying age and are keeping demand for housing high.”
She also believes that millennials who are currently struggling are affecting the market in other ways.
“Millennials still living at home for affordability reasons are also affecting the market,” she said. “With adult children still at home many baby boomers cannot yet downsize as planned and they are keeping the housing supply tight.”
McDonnell agrees that Millennials are a key part of the real estate cycle.
“From my observations, Mainland China is purchasing many of the detached homes in Vancouver, baby boomers are competing for the downsize townhouse options - where they compete with the Gen X upgrades - and millennials are purchasing smaller condos and townhouses.”
When it comes to the future, most of the agents we spoke to felt like millennials would continue to take over more market share in the real estate market in coming years. That would lead to a greater emphasis within the industry on all the features that millennials like such as upgrades, nice finishes, and larger condos.