Millennials are changing the definition of ballin’, foregoing the ritzy neighbourhoods and suburbs in favour of classy condos close to the downtown core, according to a report by Sotheby’s International Realty Canada.
“Generation Y is willing to sacrifice space in favour of a trendy and urban location, treating neighbourhoods as a direct extension of their personal living space,” says the report. “Changing generational values are redefining top-tier neighbourhoods as urban, eclectic, emerging areas with socio-economic, ethnic and linguistic diversity.”
First-time luxury condo buyers in Vancouver predominantly lean towards a minimum of 800-square-feet, with 90 per cent of Vancouver’s Millennial one percenters buying within 5 km of downtown. In Montreal, they’re chiefly choosing 850-square-feet condos, with 95 per cent also buying within 5 km of downtown. While Toronto’s high-net worth Millennials are after 900-square-feet, they’re willing to stray a little further from downtown with 85 per cent purchasing within 10 km of downtown.
Oil-rich Calgarians are the outlier, with 70 per cent choosing to live within 5 km of downtown but opting for roomier 2,000-square-foot townhomes and in fills.
While the average cost of a home in Canada is $431,812, according to the Canadian Real Estate Association’s most recent data, Sotheby’s says Millennials living large are forking over nearly double that spending $800,000 to $1 million for luxury digs in Vancouver, $800,000 to $1.5 million in Calgary, between $800,000 and $2 million in Toronto and $400,000 to $1.5 million in Montreal.
But with mortgage insurer Genworth Canada planning to raise premiums for those with a down payment of less than 10 per cent, first-time luxury-buying Millennials will get the same shock as average first-time buyers given that 85 to 95 per cent of first time luxury buyers are reliant on mortgages despite above average salaries ranging from $50,000 to $250,000.
Luckily, Mom and Dad are here to help.
“The vast majority (of high net worth millennials) also receive outside financial assistance towards down payments, primarily from baby boomer parents,” says the report.
Sotheby’s also pointed the lens at Generation X, dubbed Family-Driven Aspirational Buyers and Baby Boomers, categorically referred to as Luxury Real Estate Traditionalists.
According to the survey, Baby Boomers are less adventurous than their kids and more likely to buy homes in “longstanding prestigious communities” looking for neighbours with similar socio-demographic backgrounds. They spend, on average, $2 to $5 million in Vancouver, $1 to $4 million in Calgary, $2 to $4 million in Toronto and $1.5 to $2 million in Montreal.
Luxury home-buying Generation X-ers on the other hand are looking for neighbourhoods close to schools in diverse areas and communities spending $2 to $4 million in Vancouver, $1 to $2 million in Calgary, $1.5 to $2.5 million in Toronto and $1-1.5 million in Montreal.
“With the majority of (Boomers) earning a combined household income of $300,000- $500,000 and often above, those who carry mortgages do so as a deliberate investment strategy rather than out of necessity,” says the report adding that “Only a small minority of generation X receives family gifts or assistance on their initial down payment.”