Skyrocketing house prices and ballooning debt are making it a struggle for Canadian millennials to break into the housing market, a new study by KPMG found.
While around three in four millennials still have homeownership as one of their goals, close to half said it would likely remain as a "pipedream" due to several reasons.
Even millennials with good-paying jobs are struggling to afford a home, said Martin Joyce, KPMG partner and national leader for human and social services.
"The combination of rising house prices, high levels of personal debt and annual incomes that are just a fraction of the cost of buying a home compared with their parents' generation, is pushing the dream of homeownership out of reach for many millennials," he said.
The indebtedness of millennials was due to high levels of student debt, according to the study. Furthermore, millennials who were able to enter the housing market have taken on larger mortgages relative to their incomes.
Household debt has been on an upward trend for the past 30 years and recently reached record highs, making homeownership even more unaffordable, especially in tight markets. In fact, the debt-to-disposable income ratio in Canada has risen considerably, from 87% in 1990 to 175% at the end of 2018.
And while millennials are willing to take on higher levels of debt to attain homeownership, they are less optimistic about the payoffs.
On average, it would take 13 years for millennials to save for a 20% home-loan deposit. It took their parents just about five years in 1976.
"That's eight fewer years that millennials might have for saving more for their retirement. If they do manage to save up and buy a house now and delay retirement savings, our poll finds 65% of millennials fear they won't have enough saved for retirement," Joyce said.
The millennials surveyed in the study cited several measures the federal government can do to help ease the housing affordability concerns. Some of these measures include making it easier to use Registered Retirement Savings Plan (RRSPs) for down payments, raising Tax-Free Savings Account (TFSA) limits, and implementing a new registered savings system.
"It seems pretty clear that millennials are in a unique situation in terms of their ability to purchase a home — which has historically been a foundation for retirement stability — and most Canadians agree that the government has a role to play in making it a more achievable dream for many of them," Joyce said.
The infographics below shows the highlights of the study: