Tomkinson: Montrealers as stressed as Vancouverites about saving for a home

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Friends and family in Vancouver like to post envy-inducing beauty shots of cherry blossoms in early spring when I’m still scraping frost off my windshield and bracing for the next round of ice storms. I like to retaliate by posting links to homes for sale in my neighbourhood.

Our spring weather may not compare, but Montreal buyers have Vancouverites beat when it comes to house prices.

Young professionals in Vancouver earn salaries that are a bit higher than Montreal (StatsCan reports median employment income for full-time workers in 2015 was $54,955 in the Vancouver CMA compared with $49,292 in Montreal), but the difference in cost of living is dramatically less here.

Mathematically, there’s no doubt the odds are in our favour. Not only do daycare, groceries and gas cost less, but home prices in Montreal are about one-third that of Vancouver. In the Q1 2019 Royal LePage House Price Survey, the aggregate price of a home in Greater Montreal Area was $406,332, while the aggregate price of a home in Greater Vancouver was $1,239,306.

Feelings don’t tally so neatly, however.

Although the ratio of income to house prices is much more favourable in Montreal, a survey released this month by residential mortgage insurer Genworth Canada in collaboration with Royal LePage found that first-time buyers in Montreal are even more worried about saving up a down payment than buyers in Vancouver.

Sixty per cent of those surveyed in Montreal said they were worried they might miss out on a property they wanted because they hadn’t saved enough for a down payment, compared with 58 per cent of Vancouverites.

According to Royal LePage Quebec vice-president and general manager Dominic St-Pierre, the finding came as a surprise, given that Vancouver homebuyers need to save much more to buy a home.

While the rise in prices in Montreal over the last few years has been modest compared with the eye-popping gains made in Vancouver and Toronto, St-Pierre said one explanation is that homes here are also selling much more quickly than locals are used to, so buyers are feeling more pressure to get in the market.

“Not only are prices increasing rapidly and getting pretty up there, but also the market is moving quickly, so new home buyers need to make their decision pretty fast,” he said.

But I don’t think it’s the fast pace of the market alone that is causing this anxiety. There is a growing unease among young adults about widening inequality. Many of those who got into the market early, whether through diligent saving or a boost from the Bank of Mom and Dad, have made great gains in wealth (on paper, at least).

As prices go up, those who haven’t bought yet are increasingly worried they may never be able to buy. They’re in the last leg of the race, and the finish line is being pushed back faster than they can run.

They may be right to worry. A recent Statistics Canada analysis comparing wealth and debt among young adults across three generations (boomers, Gen-X and millennials) confirms that the gap between rich and poor is widening from one cohort to the next, and that home ownership is a critical factor. The study used census data collected in 1984, 1999 and 2016 to compare the incomes, assets and debt of 25- to 34-year-olds in each data set.

StatsCan found Canadian millennials aged 30 to 34 who invested in the housing market had a median wealth of $261,900, compared with $18,400 for those who did not invest. Despite greater debt loads, those who owned property in Vancouver and Toronto had a higher net worth than those in more affordable housing markets, thanks to rapid price increases.

The cost? Much higher levels of debt. The ratio of debt to after-tax income reached 216 per cent for millennials, compared with 125 per cent for young Gen-Xers and just 80 per cent for young boomers.

Despite steep increases in home prices over the years, buying behaviour was very similar across the generations, with about half of young people investing in real estate by age 30 to 34 whether they were boomers, millennials or Gen-Xers. In each generation, it was home ownership, not just income, that was most closely linked with higher net worth.