Owning a home has always been an important rite of passage for Canadian adults and a way to help secure their financial future. But younger people are finding that's no longer as easy as it was in the past.
KPMG in Canada commissioned a poll recently asking millennials about housing affordability and retirement, and some of the numbers are stark. Almost half of those polled between the ages of 23 and 38 say home ownership is just a pipedream, even though the majority of them hope to own a home someday. Sky-high house prices–especially in the tight markets of Vancouver and Toronto and compared with average annual incomes–are squeezing this young cohort out of building that important nest egg.
Those 'lucky' ones who have been able to buy a home have done so by taking on an enormous amount of debt, which makes them vulnerable to financial downturns and makes saving for retirement even harder. It takes millennials an average of 13 years to save for a down payment, while it took their parents just about five years in the mid-1970s. They are delaying saving for retirement, and fear they won't have enough.
So, millennials face a dilemma: buy a home or start saving for retirement. Not only that, but neither of those paths looks as promising as it did for generations before them. If they buy a home, they fear they've paid so much that it won't be worth as much in the future. If they opt to save for retirement, they are losing out on an asset that they might need in retirement.
Retirement in itself doesn't look so promising either. A large majority of respondents from all age groups in our KPMG poll think there will a shortfall in retirement savings in 30 years and more government benefits will be needed to support income needs. And almost all millennials think the retirement age will go up and they'll be working well past 65.
When it comes to their financial outlook, millennials are in a true catch-22.
Highlights of the poll:
- 72 per cent of millennials say they hope to own a home but 46 per cent say it's just a pipedream;
- Of those who were able to buy a home, 46 per cent got help from their parents and 38 per cent think their house will have less value in the future;
- 82 per cent of all respondents say we'll need more CPP in the future, 89 per cent say Ottawa has to do more to protect pension plans and 83 per cent say both public and private retirement and pension systems will need an overhaul.