This past summer, my family and I made a unanimous decision to sell our 30-year-old townhouse in Scarborough for a detached house in the west end of Vaughan. A strategic upgrade, as my parents called it.
Although ecstatic about the upsizing, I was a little troubled about the reality of the housing situation in Canada. What had sparked this apathy towards the housing bubble was actually the gentlemen who bought my old home. He was a 34-year-old bachelor with a university degree who had managed to save up just enough money to afford his first house.
Thirty-four years old, in my imagination, is a benchmark where I expect myself to own a generously sized house with a white picketed fence while my two-point-one kids run around in my grassy backyard.
Call me optimistic, but I would say that this is an expectation that many millennials hold to their standard. This revelation points a clear finger at the undeniable affordability crisis in the Canadian housing market.
The growing housing prices, rising rent, as well as the difficulty of getting mortgages has pushed the average age for the purchase of a first home from the mid to late 20s to the mid-30s.
“Multiple factors have influenced the housing market,” says Mary Zontanos, a real estate agent from PSR Brokerage. “It is definitely more challenging for young Canadians to buy due to demand, previous debt such as student loans, starting a new career, and not having enough to put away.”
In retrospect, much of this crisis can be accredited to wealthy foreign investors purchasing Canadian real estate.
“Foreign buyers are investing their money in houses in Canada, which they do not occupy but rather sign the home ownership under a student or homemaker,” says Ivan Kovalen, a chartered accountant.
When filing taxes, the individual occupying the overpriced house pays little or no income or capital and gains tax because the average student or homemaker does not have high earnings, he says.
“These owners are utilizing public services, while living in mansions and essentially paying no taxes. Again, these homes are unaffordable to locals who are feeling squeezed in the housing market,” he says.
Locals live in average-sized homes, claim average yearly earnings while foreigners live in mansions, and claim little to no income, making them exempt from average taxes which pay for local goods and services for everyone.
“Technically, no one is breaking the law because there is no law set in place to stop these tax avoidance loopholes.”
In 2015, mainland Chinese buyers accounted for 21 per cent of real estate transactions between 1 to 3 million dollars and 11 per cent of sales below 1 million dollars in Vancouver, according to data from Macdonald Realty.
Thus, growing the lack of affordable housing which first time home owners are looking to purchase.
“I don’t see any signs of a weakening Canadian housing market yet. A weak dollar accompanied with record-low interest rates entices foreigners to continue propping up the housing market,” says Antonio Peng, a fourth-year administrative studies student and junior research analyst.
This crisis presents an even harsher reality for renters, as the scarcity of affordable rental units in the GTA has resulted in common rates for renters of $1,500 to $2,000 a month for a decent house.
This creates a vicious loop where recent university grads are paying high rent, making them unable to save for a down payment, causing difficulty in getting a mortgage.
However, all hope is not lost, as the Canadian Mortgage and Housing Corporation is taking steps to fill the data-gap of foreign buyers. CMHC, a crown corporation, surveys property managers and non-resident home owners, including Canadian citizens whose permanent residence is outside of Canada, as well as monitors unregulated mortgage lenders.
Looking into the bleak future, the housing state may seem dark, but could reflect the changing future for today’s ambitious university grads. The days of the white picketed fence are over.
Jerry Zhang, Contributor
Photo courtesy of Mark Moz
