In Canada, millennials are still buying houses, somehow

Some young Canadians celebrate their good fortune. (Okay, they were celebrating some hockey.) Image: Getty.

Both Toronto and Vancouver had frantic housing markets in 2017 — prices skyrocketed and many properties sold with bidding wars that pushed their prices high over the listing price.

The 15 per cent surtax on foreign investors was introduced in Vancouver initially and then later in Toronto to help cool the market. Despite the fact that foreign ownership of real estate is not particularly high, the market in both cities slowed markedly (if temporarily) after the imposition of the taxes while vendors and purchasers waited to see what their impact would be.

The new mortgage qualification guidelines introduced in January 2018 have had the effect of reducing the amount of mortgage debt borrowers qualify for, and has also had an impact on activity in the market.

Both these policies have had a dampening effect on the number of resale transactions. Sales were down 19 per cent in January and February but overall, showed a small increase in March.

There has also been considerable media attention about falling average house prices, especially in Toronto, but this is misleading. Average house prices can fall because the characteristic of the average house sold changes — for example, smaller houses are selling while larger, more expensive ones are not.

Home ownership remains a Canadian dream

Real estate registry data specialist Teranet and the National Bank of Canada have created a price index that tracks price changes in the same houses as they sell over time, which provides a more accurate reading of price changes.

The April 2018 index shows moderate price increases in Toronto since the beginning of the year (0.3 per cent) and a year-over-year increase of 1.89 per cent. Vancouver shows a year-to-date increase of 2.41 per cent, and a substantial year-over-year increase of 15.89 per cent.

Despite these statistics, Canadians are hanging onto the goal of owning a home.

A recent RBC survey found this motivation strongest among millennials, with 39 per cent expecting to buy within the next two years, compared to 25 per cent overall for the survey. Condominium sales in Toronto in the past year have been much stronger than sales of single family homes presumably because of this demographic.

Fifty-nine per cent of millennials have already achieved their dream of home ownership, according to a survey by mortgage insurer Genworth Canada released in early May 2018. This seems high given the Statistics Canada rate of home ownership in 2016 of 43.6 per cent for 20-34 year olds.

However, Genworth reports that of those milllenials who own, 30 per cent bought a home (not always a first home) within the last two years despite the extreme nature of markets. This compares to nine per cent of respondents over 34.

Millennials keep pace on home ownership

Given the national home ownership rate of 67.8 per cent according to the 2016 census, millennials are not far behind. Ownership rates in 2016 were 66.5 per cent in Toronto and 63.7 per cent in Vancouver. Given the large increase in house prices in these two cities, the difference in ownership rates may deviate further from the national average in the next census.

With similar results to the RBC survey, Genworth’s study found that another 30 per cent of millennials plan to buy in the next two years.

This begs the question: How have millennials been able to fulfil their home ownership goals, and how will they be able to do so in the future?

One way is that they’re saving money by living at home with their parents after completing post-secondary education. Overall in Canada, more than a third of those 20 to 34 live at home with at least one parent. (This percentage is comparable in the United States, Britain and Australia).

In Toronto, this ratio rises to 47.4 per cent; in Vancouver it’s 38.6 per cent. This is a low-cost way for parents to help their children save for a downpayment (although in some cases, the child is supporting the parent rather than vice versa).

Parents help with downpayment

The RBC survey also revealed that 35 per cent of millennials planning on buying in the next two years anticipate getting help with the downpayment from their parents.

Baby boomers have benefited from home price increases recently, and can borrow against the equity in their homes relatively cheaply on secured lines of credit.

But this raises a couple of concerns.

Boomers may be taking on this debt at a time when they are planning retirement and their income is declining, leading to financial pressure for the parents. As well, not all parents can raise capital in this way, and some aren’t willing to — leaving an equity gap between those who get help from their parents and those who don’t and may not be able to buy as a consequence.

Millennials are being creative in others ways to assist with affordability. Most in Toronto and Vancouver who live in rental accommodation have roommates. Some take one or more roommates with them as renters when they buy to help with mortgage payments. Others buy a property with rental potential — a duplex or a house with a basement apartment.


Does roommate face eviction?

While these tactics may allow millennials to enter the housing market, they have implications for the long term. What happens when the homeowner decides to have a child? Will the roommate be evicted, and if so, how will the mortgage and day-care costs be covered? Having children may be postponed or not be an option at all.

Eventually, millennials may choose to leave these very expensive cities.

This is already happening in Ontario as people buy in the Waterloo area or Hamilton and commute to Toronto. After a few years of tedious commuting, they may look for employment closer to home.

A lack of affordable home ownership options in Toronto and Vancouver may eventually make them less attractive as locations for businesses if their prospective employees cannot afford to live within a reasonable proximity to work.

This is a complicated issue with no easy solution but one that needs continued attention —it has broader implications than just the fact that some millennials may not be able to buy homes.

Jane Londerville, Associate Professor of Real Estate, University of Guelph.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

What are Europe’s longest train journeys?

The Orient Express was a pretty long train. Image: Getty.

For reasons that aren’t clear even to me, a question popped into my head and refused to leave: what’s longer? Britain’s longest train joruney, or Germany’s?

On the one hand, Germany is quite a bit larger – its area is 70 per cent more than Great Britain’s. On the other hand, Great Britain is long, skinny island and Germany is much rounder – the distance from John O’ Groats to Lands End is over 1,400 km, but you never have walk over 1,000 km to cross Germany in any direction.

And it turns out these factors balance almost each other out. Britain’s longest train, the CrossCountry from Aberdeen in Scotland to Penzance in Cornwall, runs 785 miles or 1,263 km. Germany’s longest train, the IC 2216 from Offenburg in the Black Forest to Greifswald on the Baltic coast, is exactly 1,300 km. Germany wins by a tiny distance.

Except then I was hooked. What about the longest train in France? Spain? Italy?

So I did what anyone would do. I made a map.

The map above was all drawn with the Deutsche Bahn (Germany Railways) travel planning tool, which rather incredibly has nearly every railway in Europe. The data quality is better for some countries than others (the lines in France aren’t quite that straight in real life), and the measurements may be a bit off – it’s not always easy to find the length of a train service, especially when routes can vary over the year – but it gives us a good idea of what the routes look like.

Let’s start with the UK. The Aberdeen to Penzance route isn’t really for people who want to go all the way across the country. Instead, it’s a way to link together several railway lines and connect some medium-to-large cities that otherwise don’t have many direct services. “Cross-country” trains like these have existed for a century, but because they crossed multiple different company’s lines – and later, multiple British Rail regions – they tended to get ignored.

 

That’s why, when it privatised the railways, the government created a specific CrossCountry franchise so there was a company dedicated to these underused routes. If you want to get from Edinburgh to Leeds or Derby to Bristol, you’ll probably want a CrossCountry train.

The usual route is Edinburgh to Plymouth, but once a day they run an extra long one. Just one way though – there’s no Penzance to Aberdeen train. 

The longest train in Germany is weird – at 1,400 km, it’s substantially longer than the country itself. On the map, the reason is obvious – it takes a huge C shaped route. (It also doubles back on itself at one point in order to reach Stuttgart).

This route takes it down the Rhine, the biggest river in west Germany, and through the most densely populated patch of the country around Cologne and Dusseldorf known as the Ruhr. Germany’s second and third longest trains also have quite similar routes – they start and end in remote corners of the country, but all three have the Rhine-Ruhr metropolitan area in the middle.

You’re not meant to take the IC 2216 all the way from north east to south west – there are much more direct options available. Instead, it’s for people who want to travel to these major cities. They could run two separate trains – say, Offenburg-Dusseldorf and Griefswald-Cologne – but making it a single route means passengers benefit from a bit more flexibility and helps DB use its rolling stock more effectively.

France’s longest train exists for a very good reason. Most of France’s high-speed lines radiate out from Paris, and it’s very hard to get around the country without going to the capital. Usually to get from Marseille on the Mediterranean to Nantes near the Atlantic, you’d need to take a TGV to Paris Gare de Lyon station, then get the Métro across the city to Gare Montparnasse.

Once a day though, this TGV avoids this faff by stopping in the suburb of Juvisy and turning around without going into the centre. This lets passengers travel direct between the coasts and reduces the traffic through Paris’s terminals in the rush hour. The exact length of this route isn’t clear, but Wikipedia says it’s about 1,130 km.

Spain’s longest train is very different. This is the Trenhotel sleeper service from Barcelona to Vigo, and it’s pretty fancy. This is a train for tourists and business travellers, with some quite luxurious sleeping cabins. But it is a regularly scheduled train run by the state operator Renfe, not a luxury charter, and it does appear in the timetables.

Being dry, hot and quite mountainous in its middle, most of Spain’s cities are on its coast (Madrid is the one major exception) and as a result the train passes through relatively few urban areas. (Zaragoza, Spain’s 5th largest city, is on the route, but after that the next biggest city is Burgos, its 35th largest,) This is partly why overnight trains work so well on the route – without many stops in the middle, most passengers can just sleep right through the journey, although there are occasional day time trains on that route too if you want to savour the view on that 1,314 km journey.

Finally, there’s Italy. This is another sleeper train, from Milan in the north to Syracuse on the island of Sicily. It goes via Rome and travels along the west coast of... wait, it’s a train to the island of Sicily? How, when there’s no bridge?

Well, this train takes a boat. I don’t really have anything else to add here. It’s just a train that they literally drive onto a ferry, sail across the water, and then drive off again at the other side. That’s pretty cool.

(As I was writing this, someone on Twitter got in touch to tell me the route will get even longer in September when the line to Palermo reopens. That should be exciting.)

So those are the longest trains in each country. But they aren’t the longest in Europe.

For one thing, there are some countries we haven’t looked at yet with very long trains. Sweden has some spectacular routes from its southern tip up into the Arctic north, and although the Donbass War appears to have cut Ukraine’s Uzhorod to Luhansk service short, even Uzhorod to Kharkiv is over 1,400 km. And then there are the international routes.

To encourage the Russian rich to take the train for their holiday, Russian Railways now run a luxury sleeper from Moscow to Nice, passing through France, Monaco, Italy, Austria, Czechia, Poland, Belarus and Russia. This monster line is 3,315 km long and stretches across most of the continent. That’s got to be the longest in Europe, right?

Nope. Incredibly, the longest train in Europe doesn’t actually cross a single border. Unsurprisingly, it’s in Russia, but it’s not the Trans-Siberian – the vast majority of that’s route is in Asia, not Europe. No, if you really want a long European train journey, head to Adler, just south of the Olympic host city Sochi. From there, you can catch a train up to Vorkuta on the edge of the Arctic Circle. The route zigzags a bit over its 89 hour, 4,200 km journey, but it always stays on the European side of the Ural mountains.

Bring a good book.

Stephen Jorgenson-Murray often tweets about this kind of nonsense at @stejormur.


All maps courtesy of Deutsche Bahn.