By Sabrina Almeida
Worried that your millennial’s earnings do not support his or her taste for the good life? Constantly nagging your kids to get their priorities straight? Then you might agree with Tim Gurner’s diagnosis of this generation’s (those born 1981 to 2000) housing affordability issues.
The 35-year-old Australian millionaire and real estate mogul caused a real stir when he attributed ‘fancy toast’ and ‘overpriced coffee’ to their financial woes. The outburst came from millennials and the media who unleashed plenty of statistics to show lifestyle had little to do with being unable to afford sky-rocketing house prices in Australia, the UK, and especially the GTA.
Is there any truth to his statement?
As the parent of a millennial who shows a preference for the finer things, I can understand what Gurner meant. Much of my son’s earnings as an intern and now in retail are spent on treating himself to meals and entertainment. Cheaper and “healthier” home food rarely figures on his lunch and dinner menu when he is on the go. His colleagues and friends lead the same lifestyle. The reason they can do this, in my opinion, is the family support structure. If rent and groceries came out of their own wallets, then perhaps “plain toast” might be their only option.
Having worked hard to get to his enviable position from a young age, Gurner can probably afford to pontificate about what it takes. I have come across some savvy millennials with a do-or-die approach to making it work. While they may be the exception, they are also proof that goals can be achieved when you put your mind to it. Even if it takes a little big longer than you planned for.
Without a doubt, millennials buying power supports the economy in a big way. It’s the reason why companies are falling over themselves to woo them. Take the all-day breakfast menus being introduced by the major fast food chains for example.
Also, with the emphasis being on “convenience” and “experience” most are willing to pay more to be satisfied than their parents or grandparents did. And business is quick to cash in.
As my son admitted using a credit card adds to the problem. And he’s right. Having grown up in a cash-based economy, I learned to live within my means. He also threw some fancy words at me yesterday, about “experience” which had me rolling my eyes.
So, while the amount one spends on avocado toasts and fancy Starbucks coffees might seem an insignificant contribution to a down payment for a house, it hardly means that one should continue indulging yourself with no thought for the future.
Is the economy to blame?
Having said that, the economy has an important role to play in the affordability factor. Coming out of school with crushing student debts, struggling to find decent paying jobs and lack of job security has kept majority of millennials in their parental homes. Given this scenario both getting married and owning a home is put on the back burner.
The same slow economy has also caused the middle-class to put all their eggs in one basket—real estate. Most will tell you that their biggest earnings have come from buying and selling homes. Encouraged by their success, virtually every homeowner now dreams of buying more property and the rental earnings it can fetch them. Jobs being scarce as well as precarious, they hope the rental income and insanely appreciating property values will alleviate their financial situation.
But… are millennials really at a disadvantage?
Yes, the odds are certainly stacked against them. TREB reported in April that the average price of a condo in Toronto passed the half-million-dollar mark and that of a single-family home was $1.56 million. It was only slightly lower in the 905 region at $1.24 million. That’s a pipe dream for most millennials, causing many to almost give up and revel in the moment instead.
This horrendous situation is made worse for those with no financial support from family to fall back on. With student debt clipping their wings and struggling to find full-time employment, owning property is the last thing on their minds.
Millennial who do not want to live with their parents find themselves paying huge rents for shared accommodation while managing groceries and all their other needs.
The few who are able to afford housing find themselves pushed further away from family, leaving Gen X and baby boomers with high-priced homes that do little to compensate for the absence of their kids and grand kids whom they long to see.
What’s the solution?
Any governmental efforts towards cooling the housing market seem to have had little effect on the rising prices in the GTA so far. Like the millennials, most first-time home buyers with earnings averaging $50,000 find themselves priced out. While speculators and investors find creative ways to circumvent the system and snap up more properties. Perhaps they should stop to think about what it could mean when the time comes for their kids to purchase a home!