The Great Millennial Debate: Rent or Buy
The ‘great’ Canadian dream of buying a house in your mid-twenties seems like a fantasy at this point. Almost a shocker that people in their 20’s were once able to buy a house! Nowadays, people born between 1980’s to mid 1990’s – millennials – are prime candidates to buy a house due to them entering or have firmly established a career. However, majority of these are choosing to rent over buying a property. The reasons are simple: they simply cannot afford it and/or their desire to have freedom and flexibility in life.
Millennials have a new perspective in life, and especially about financial resources. They prefer experiences over material possessions, and would rather spend money travelling over a house. A house also is not feasible as they sought after adventures and are wiling to move around for employment, education, or even recreational purposes. Thus, having a house limits this freedom as they think they would be tied down to a certain location and mortgage. An article by the Financial Times, “Millennials discuss why they cannot afford to buy homes” discuss financial insecurity, delay in major milestones, student loans, and spending habits as some of the attributes to preferring rent over buying.
An article by Forbes, “Millennials Are Driving Up The Single-Family Rental Market – Here’s Why” explores this topic event further, and concludes that there is favoritism towards rental for millennials now. They prefer single-family rentals as they get a house with a yard and a garage, but rent instead of paying for a mortgage.
While many see the benefits of renting due to it’s affordability and short term commitment, David Bach, co-founder of AE Wealth Management and self-made millionaire thinks otherwise. He claims that the biggest mistake millennials are making is not buying a home because buying a home ‘is the escalator to wealth.’ His reasoning is that it is better to invest and spend money on a mortgage instead of rent as in the end you get to own your own home, and not pay for someone else’s mortgage. He talks more about reasons why to invest on a house in this article, “Self made millionaire to millennials: Don’t rent a home – buy” as buying a house sooner maybe more feasible because of the rising home prices.
To summarize, many millennials do not have a choice when it comes to home ownership. Many cannot afford it or it does not suit their semi-nomadic lifestyle. However, the benefit of buying a house early means building home equity and your money (instead of going to rent) is being put into a property that you will get to own.
There are many sides to each story, which one do you think will be beneficial, to own or rent a property for millennials?