Vishal (name changed) graduated from college two years ago carrying a unenviable student debt and has yet to hit his stride professionally. His parents like many South Asians live in a large home on a quiet cul-de-sac and are really upset with him because ‘he’s wasting his money renting a condo in Toronto.’ “Why is he renting when he can live here for free and even enjoy home cooked meals?” asks his bewildered mother. Yes, why indeed has he not taken up his parents’ offer to become a young adult freeloader living in their basement?
Renting gives much needed flexibility
Vishal on the other hand sees things differently. He works in Toronto and decided that it made economic sense living there as well after doing the math. Driving to work every day would’ve been a nightmare, taking the GO and then transferring to the TTC would still not be convenient and neither would it save him time. Sure he’d save on rent if he lived with his parents, but after spending four years away at school, moving back in with his family felt lame. I mean a 24-year-old needs his privacy, especially if he has a girlfriend. Also living in Mississauga would entail the expense of a car after all so many can attest that not having wheels in these parts is an expensive necessity. Living in the city means he is at work in 20 minutes, leaving him more time to pursue an evening course and a slew of leisure activities.
Vishal would like to buy a condo or a small pad someplace close to the city, but for now it’s like dreaming about winning the lottery. He is part of a growing trend across North America where youth are opting to rent or buy smaller dwellings in cities. Many of them are opting out of car and home ownership, renting and car sharing is now the norm for this generation. This is a consequence of two factors- rising home prices which have climbed out of reach for a majority of those now entering the job market and youth unemployment which now stands at 13.20, which incidentally is higher than even India’s 12.90 as of July 2015.
It is not that Vishal can’t buy a home as his parents suggest, they’ve even offered to help with the downpayment, he simply doesn’t want to be tied down.
When a person buys a home, he or she psychologically puts down roots, they end up seeking jobs in a particular geographical area. So if Vishal bought a home in Mississauga, he’d be looking at jobs preferably headquartered in the Peel Region followed by Toronto. How about if he saw a great opportunity in another city, say Barrie or even another province? He’d balk at having to the hassle of selling his home and moving, the whole process would be too off-putting. Not so if he continues to rent. If a great job offer came up in another city, Vishal would be have no qualms taking a risk and re-locate. Not so, if he owned a place in the GTA, selling and moving would be fraught with too much risk and tension.
Renters can up and move in a month
Here’s the cold hard truth. Today few young people are finding good jobs. Fewer young people are getting married and even fewer young people are buying homes. With so much economic uncertainty and job insecurity, which young person who has just struggled or continue to struggle to pay off their student debt would want to pile on some more in the form of a ridiculously high mortgage?
Older generations are puzzled by the choices made by the millennials, after all their financial and social benchmarks were finding a job, getting married, and buying a home. How quaint!
Millennials are reluctant to piling on more debt
Many young students typically spend the first couple of their working lives paying off their student loans. Canada’s total student loan debt to over $22 billion. In my Mississauga neighborhood, I’ve encountered several young Caucasian families and couples most of them are renting. I spoke to a young couple who were Hamilton transplants. They moved to Mississauga to be close to their places of work having had enough of the daily commute. Buying a place in Mississauga they said was not an option given the cost. Furthermore, what if one of them found their next jobs in another town or city?
They wanted to keep their options open and although they had decent jobs were loathe to make Mississauga their final port of call.
This sort of thinking has several implications for the housing market, car industry and home and auto insurance. It can be a game changer.