Good To Know: Alternative Home Ownership Strategies for Millennial Buyers

By all intents and purposes, it’s reasonable to presume Toronto’s Millennial generation grew up with the expectation of following in their parents’ footsteps, especially in regards to home ownership. Most likely reckoned they would get an post-secondary education, a well-paying job in their intended field, save enough money for a down payment, secure a mortgage, purchase a house to put their roots down in, and then let life take its course from there.

Fair enough, right? After all, that’s mostly how it worked for the Baby Boomers and Gen-Xers who preceded them. But unfortunately, this reality has become so much more difficult for Millennials in the city to attain.

To say Toronto is in the midst of a blistering seller’s market is an understatement. It’s a shocking bit of news that we’re all well aware of.

According to no less an authority than the Toronto Real Estate Board (TREB), the average price of a GTA home is predicted to climb by double digits this year (again), peaking at a new average of $825,000. To boot, ruthless bidding wars with soaring multiple offer amounts have become commonplace on both the detached home, semi-detached home, and condo unit frontiers.

And because these figures continue to rise since the housing supply can’t keep up with population growth and demand, many young buyers are finding themselves effectively priced out. It’s unfortunate. It’s unfair. (It is.) And it’s destabilizing. But truth be told, it should not point to the end of road for them.

So if you’re part of this youthful demographic regrettably being squeezed out, then perhaps you should consider a few of the following alternative home ownership strategies.

Hell, these alternatives to the archetypical, “home with a picket fence” are suitable for any generation.

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Via Shuttershock.

1) Shared home ownership…  

Co-ownership is a concept common in the United Kingdom, and the strategy has gained some momentum in Ontario as of late. So much in fact that it’s been covered in detail by CBC News, the Toronto Star and most recently in Toronto Life. Essentially, as real estate prices aggressively climb upward in the city, some buyers are pooling their resources to procure property together. And the arrangements for making these forms of co-ownerships work are as varied as they are advantageous. Recent Toronto examples have seen everything from purchase costs split evenly amongst the groups of buyers, to banks allowing separate mortgages between them, to renovation costs being split to divide the living space, to certain owners taking on specific property management duties, to monthly mortgage payments coming out of joint bank accounts, to life insurance policies being taken out to ensure the right owners will be entitled to their portion of the house in the event of another’s death, and so forth. No, it’s not always a cut-and-dry solution and complications can inevitably arise. But the thinking here is: if you can’t afford to buy alone, yet are able to together… why not start building some equity?

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2) Purchasing pre-construction…

The benefits are numerous, especially once you debunk some of the nagging myths about buying pre-construction. The good news is that we already did that for you awhile back. But in short, availing yourself of this strategy can spare the competition being found right now in the condo resale market. Repeat after us: NO MULTIPLE OFFERS! Additionally, you’re able to purchase pre-con at a lower cost than resale—with mortgage rates locked in, too—plus the odds are you will prosper come occupancy time, thanks to higher valuations on appraisals and potential rents. So at the end of the day, you are not only leaving the whole bidding war thing in the dust, but initiating a wealth accumulation tactic.

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3) Taking over an exclusive condo assignment…

Here’s a strategy that not many are aware of because little—if anything at all—has been written about it. Which probably suggests that not many have considered the course of action yet. But it’s a game plan one PSR agent recently employed when his buyer found themselves repeatedly on the losing end of escalating bidding wars in the condo market. Simply put, there is a huge inventory of available pre-construction condo units out there which have been built, are ready to occupy and remain empty—while the building itself pushes towards general completion and registration (which we previously covered here). They are called assignments, referred to as such because the Seller is actually selling their contract with the builder, since they don’t own the actual condo yet. In other words, they’re assigning it. The kicker? Nobody really knows about these assignments because so many are exclusive listings, meaning they aren’t on MLS. By doing some legwork—like contacting PSR, whose agents often represent exclusive assignments available in Toronto’s best new developments—you can find out where these prospects are. If one of them is your cup of tea, the benefits are untold. Like being the first to inhabit a state-of-the-art unit in a brand spankin’ new building. Or more importantly, you’d be doing so likely without the burden of multiple offers, the inevitable bidding war or inflated prices.

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4) Heading to the suburbs and further distances…

To combat being frozen out of the market, a lot of Toronto Millennials are compromising by kissing the big city goodbye and relocating to other parts of Ontario, like Oshawa and Barrie. In fact, judging by Statscan’s latest intraprovincial migration data, Toronto has lost the highest number of young people since 1999-2000. It may not be the ideal strategy, but these buyers are encountering greater inventory, lower home prices, as well as less competition. And to make it work, they’re finding new jobs or making arrangements to do their business from home.

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5) Continuing to rent…

This one is a heartbreaker for us to recommend as a strategy, because buying a home will be the single biggest investment you ever make. Not just referring to the purchase costs and mortgage either, but—more positively—the value and capital being a homeowner affords you. So to have to consider putting money that could be spent on your own mortgage into a landlord’s pocket instead—it’s rough. No doubt about it. But here’s the thing: this market is crazy. And with the way things are going—depending on which financial analysts you listen to, of course—it could be nearing a correction. The bubble has to burst at some point, right? Which maybe means you can look at renting as more of a waiting game. It’s speculative, to be certain. However if you are able to find yourself a comfortable unit for lease with an agreeable rent, it just might be worth putting the purchase off until things cool down. Yes, this avenue is not as immediately beneficial as owning. Yet for the time being, at least you wouldn’t be on the line for property taxes or maintenance fees, or the sting of coming up short in successive bidding wars.