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The average house price in Canada reached $796,068 last March. That means homebuyers paying the 20% standard have to shell out almost $160,000 in cash.

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This sum does not take into account closing costs, which must also be paid in cash, and usually add up to a few thousand dollars more. The Bank of Montreal recommends budgeting an additional three to four percent of your home’s price for this.

Most Wealth Advisors and Estate Agents would suggest you find the funds for this by making a withdrawal from the “Parents Bank”.

But what about those who are not lucky enough to have a family heritage to rely on?

It’s harder than ever to become a homeowner

A CIBC Economics report late last year shows that leaning on their parents is exactly what most young Canadians are doing these days. Just under a third of first-time buyers received money from their parents, an average of $82,000, to become homeowners.

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Chris Karram, managing partner at SafeBridge Private Wealth in Toronto, says there aren’t many options available if your parents can’t help you with a down payment.

“There are so many things going on here that make it a challenge for young people today,” Karram says.

Analysis by Statistics Canada shows that millennials in particular struggle to build wealth and face different financial challenges than previous generations. While this cohort is still finding ways to enter the housing market, they are also taking on more debt to reach this milestone.

The problem has a ripple effect

It’s not just an urban problem either. Phil Soper, president of Royal LePage in Toronto, says affordability is a concern across the country, even in historically affordable areas.

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Soper recently gave a talk in Moncton, N.B. When he finished, an older woman in the audience approached him with her concerns that her children would never be able to afford a home in this market.

“She was visibly upset,” says Soper, who agreed that during the pandemic the market has seen heights it has never seen before.

But, he added, young people have always managed to buy homes in wild market conditions.

“My point was…if it’s a priority for a young family, they find a way.”

How? He says he’s moving away from downtown and opting for smaller homes like townhouses or condos instead of single-family homes. There is also the possibility of choosing older houses that need work.

Ricardo Tranjan, senior researcher at the Ontario office of the Canadian Center for Policy Alternatives (CCPA), reminds homeowners that these options also come with trade-offs. When someone chooses to buy a home away from their social life or office, Tranjan says they need to keep in mind the impact it will have on their work-life balance.

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“It has an economic cost in terms of the number of hours people spend at work, the number of hours people spend with their families and the level of satisfaction or [their] dedication to their work,” says Tranjan.

Incredibly high house prices also have long-term effects on the percentage of the population that ends up being left out of the housing market, Tranjan says. Their ability to create generational wealth is limited — and ultimately, this widens the gap between haves and have-nots, especially when it comes to racialized or new-Canadian families.

“Immigrants have always been able — through work — to acquire enough money to make that down payment, and that may not be the case in the future,” Tranjan says.

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Tranjan adds that the same problem applies to families in rural areas, working-class people, disabled employees and female-headed households.

There are other options for creating

Soper predicts the market will experience a correction – and a report from RBC Economics shows that sales have already slowed in Canada’s four largest markets since the Bank of Canada raised its key rate again in April.

By the end of the year or early next year, Soper predicts prices will come down enough to provide young buyers with an opportunity to buy property.

“I guess the message is, ‘That too will pass,’ and yes, people are finding a way to own a home, regardless of interest rates or the apparent unaffordability of housing,” says Soper.

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Karram says that to break into the market, some young people choose to buy a house or condo that they rent out, while living at home or in a more affordable apartment for the time being. Others buy homes with built-in rental units to help bring in additional income.

Another option Karram and Soper noted is for families or friends to pool their money to buy a house together. Obviously, that’s not an option for everyone, but Soper says that as the market gets harder to break into, people continue to impress him with the creative solutions they find.

However, he stresses the importance of remembering that the first priority when buying a home is that it should be somewhere you live. Unless you’re a professional pinball machine, you shouldn’t worry about whether your investment will pay off immediately.

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“These aren’t stocks you need to be liquid,” Soper says. “Generally, we’re talking about long-term investments where you shouldn’t expect to trade very often.”

And beyond that, owning a home is no longer the only way to build wealth – there are more investment opportunities open to young people than ever before, including tools like robo-advisors and tax-free savings accounts (TFSA).

“Real estate needs to be reconsidered,” says Karram. “It’s not the alpha and omega. There are many other vehicles that give us the same or greater tax advantages, that give us slow and steady growth. But that might not be as sexy as the idea of ​​owning real estate.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.