Vancouver’s cripplingly high home prices along with recent changes to regulations governing Canadian mortgages will limit millennials’ prospects of buying and owning homes—and in turn affect the national economy in the long term.
Housing policy expert Duncan MacLennan said that Canada’s real estate troubles have long passed the point of just being a human rights issue.
“We’ve got to stop thinking of housing simply as some kind of social service, but recognize that it’s a key thing to get right for any metropolitan area that wants to be a great city — and that’s what Vancouver is,” MacLennan told the Vancouver Sun.
The economist added that compounding the problem is that millennials aren’t as fortunate as previous generations, which have had decades to settle their mortgages in a more favorable fiscal environment.
“If [millennials] don’t become homeowners until they’re 40, the point at which they can pay for these other things really gets pushed further into the distance, so that I think it will have a potentially negative effect on savings by Canadian households in that time, and also on consumption,” MacLennan stated.
“The first measures that have been undertaken recently to cool the housing market in Vancouver and Toronto by being more restrictive in the ability to take out mortgages, I think actually they act against the interest of younger people and make it more difficult for them to take out a mortgage while interest rates are still low.”
These projections mirrored those of the B.C. Real Estate Association, which said earlier this week that millennials might lose as much as 1/5th of their purchasing power under the new rules.
The latest round of federal measures, which are scheduled to take effect on October 17, has led to widespread fears of less market activity, as the regulatory changes will mandate all insured mortgages with less than 20 per cent down payment to qualify at a higher rate bracket.