Rising rental costs and inflation might arise as significant barriers preventing the young generation from approaching the goal of owning their first home. According to the 2024 New Home Buyer Report by TARION, however, there has been an upward trend among people from the late Millennial and Generation Z cohorts in recent years. Their participation as first-time home buyers in Ontario has impressively increased from 3% in 2023 to 8% in 2024.
1. The young generation is leading as new first-time home buyers.
Generation Z and Millennials are two distinct generations spanning 30 years. Millennials were born between 1981 and 1996, while Generation Z, was born between 1997 and 2012. There are over 6.7 million members of Gen Z in Canada, and they are becoming a formidable workforce contributing to the country’s economy.
About 60% of Millennials in Canada who are not homeowners believe they will eventually acquire property soon. A report by the Bank of Montreal (BMO) reveals that 68% of Canadians are still hesitant about purchasing homes as they await lower interest rates in a market where high living costs are compounded by inflation.
2. Gen Z and Millennials tend to buy new and pre-construction in 2024.
According to the State of Homebuying Report from ServiceLink in 2024, Gen Z and Millennials will influence the real estate market in various ways, including purchasing homes, refinancing, and leveraging home equity. This opens an opportunity for lenders to educate and assist these young buyers throughout the process. “The younger generation is not only determined to buy homes but seems undeterred by external factors such as high prices and interest rates,” stated Dave Steinmetz, president of ServiceLink.
Besides, young people tend to prefer newly built and pre-construction homes over other housing types. In the TARION survey, 93% of respondents consider buying a home built within the last five years, and 33% of respondents believe that purchasing a pre-construction home gives them better peace of mind.
Meanwhile, repeat home buyers still predominate first-time home buyers in 2024, including the Boomer (82%) and Gen X (72%). However, there has been a slight decrease of about 4 percentage points from 65% in 2023 to 61% in 2024 in repeat buyers, while the rate of first-time buyers has slightly increased from 35% to 39% during the same period.
The survey also highlights a recent increase in new home buyers among late Millennials and Gen Z, with Gen Z buyers experiencing a 5 percentage point increase from the previous year. Additionally, the number of new home buyers who immigrated to Canada less than 10 years ago also rose to 56% from 39% last year.
With interest rates dropping to 4.75% in June 2024, and recently to 4.50% in July 2024, this could be a promising sign for this emerging generation, bolstering their confidence to engage in Canada’s vibrant housing market.
3. Detached homes are still the most preferred, but suburban areas decline in popularity.
Detached houses continue to be the most favored housing type among survey respondents, accounting for 69%. While Interest in semi-detached and townhouses is stable, condo popularity has dropped from 32% in 2023 to 27% in 2024.
Additionally, the flexibility of remote work, allows younger adults to purchase homes in more affordable areas while still maintaining employment in expensive urban centers. According to the 2022 Royal Lepage Demographic survey, young people increasingly opt for fully remote work combined with living in areas distant from city centers, with 20% favoring this scenario when asked about balancing life and work.
However, there is a significant decline in interest in suburban areas in 2024. Based on TARION, this area has decreased in preference from 57% to 49%, becoming the second most preferred community type. Meanwhile, urban areas have now become the most preferred location at 55%. Followed by small towns (17%), distant suburban areas (14%), and rural communities (8%), among others.
This shift indicates while affordability remains a central concern for consumers, work-life balance is also a significant factor in housing choices for young people. As many workplaces have begun enforcing return-to-office mandates, some homebuyers may be reevaluating issues related to finances, commuting costs, and the time spent traveling from distant residences to their places of work.
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