If you live in Canada, it’s a frustrating time to be buying your first home. Even with interest rates being the highest they’ve been in over 20 years, home prices are rising, having gone up by over 2% in May of this year. For the younger generation, the promise of building wealth through homeownership feels like a dream that’s all but faded after waking up to reality. The implications of this go far beyond affordability though. Here are 6 other negative impacts that Canada’s red-hot housing market has on our young adults.

House-Rich, but Cash-Poor

Even for those who do manage to purchase a home, the housing insanity almost always means taking on larger mortgage debts than one was prepared to. This can result in increased financial strain, as a significant portion of their income goes towards mortgage payments, leaving less room for saving, investing, or other important expenses.

Increased Rental Costs

As housing prices rise, so does the demand for rental properties, since more people are pushed out of the market to purchase. This surge in demand often drives up rental costs, making it harder for young renters to find affordable housing options, particularly in cities with limited rental supply. This can lead to overcrowding, increased competition, and a higher proportion of income spent on rent… which – you guessed it – only makes it even hard to save for a house.

Wealth and Equity Disparities

Rising housing prices can exacerbate wealth and equity disparities between younger Canadians and older generations. Those who purchased homes earlier may experience significant appreciation in their property values, while younger individuals or families struggle to accumulate wealth through real estate. This can contribute to a widening wealth gap between different age groups.

It also contributes to a piss-off factor among younger adults, who are growing increasingly more frustrated that the rich are only getting richer off their increasing inability to afford a home of their own.

Delayed Financial Milestones

With limited housing affordability, younger Canadians may have to delay important financial milestones, such as starting a family, saving for retirement, or pursuing higher education or entrepreneurship. High housing costs can redirect a significant portion of their income towards housing expenses, limiting their ability to invest in other areas of life.

Geographic Mobility Limitations

Higher housing prices can restrict geographic mobility for younger Canadians. It becomes challenging to relocate for better job opportunities or pursue career advancements in more expensive regions. This lack of mobility may hinder professional growth and limit their ability to explore different employment options.

Socioeconomic Impacts

The impact of rising housing prices extends beyond individual financial concerns. It can lead to broader socioeconomic effects, such as increased income inequality, reduced economic mobility, and a potential decline in overall consumer spending. These factors can have long-term consequences for the economy and society as a whole, and they affect marginalized communities disproportionately.

What can be done about it?

Governments have a few options at their disposal when it comes to fixing the issue of skyrocketing housing prices. They can increase the housing supply, implement affordable housing initiatives, tighten regulations on speculation and foreign ownership, and increase assistance programs for first-time homebuyers (which they’ve already begun to do with the FHSA).

None of these options are going to be a silver bullet that fixes the issue immediately; in fact, most of the tools at the government’s disposal will take years to trickle through the system and have a tangible impact on affordability.

Wrapping it Up

For nearly a century, Canadians have been sold on the idea of homeownership as a ticket to financial prosperity. Now, that dream is in jeopardy for the next generation of Canadians, and they’re rightfully angry about it. One thing is clear: the trend can’t continue indefinitely. Something’s gotta give, and when it does, it ain’t going to be pretty.