One in five young, urban homeowners admit they put off saving for retirement to afford their property, according to a survey released on Wednesday.
Sotheby’s International Realty Canada and the Mustel Group found young Canadians aren’t just skipping out on saving. Thirty-one per cent of those surveyed said they dipped into their RRSPs to afford a down payment.
First time buyers are allowed to withdraw $25,000 tax free, if the amount is repaid within 15 years.
“The dream of home ownership remains compelling for today’s young families, but the reality is that many are facing serious obstacles to achieving this given rising costs of living, rising costs of housing, and other financial needs, such as saving for retirement,” said Brad Henderson, president and CEO of Sotheby’s International Realty Canada, in a news release.
A growing number of working-age Canadians are neglecting to build an RRSP nest-egg in the first place. Statistics Canada data shows the number of contributors between 25 and 54 years old fell 16 per cent between 2000 and 2013.
The Sotheby’s/Mustel Group survey was based on 1,743 families in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas, with a focus on adults between the ages of 20 and 45.
Average housing prices fell for a fourth consecutive month in January, according to the Teranet-National Bank Composite House Price Index.
Tighter mortgage rules and five interest rate hikes by the Bank of Canada have helped cool Canadian real estate markets, but finding affordable urban housing remains a major challenge for many young people.
“While these are significant challenges without a simple or singular solution, our research reflects strategies from those who have navigated their way and successfully bought a home,” Henderson said.
The most common savings strategies were reducing or eliminating dining out (51 per cent), cutting back or cancelling travel and vacations (45 per cent), and skipping personal expenditures such as clothing or technology purchases (45 per cent). Twenty per cent said they curtailed retirement savings, while 19 per cent found a higher-paying job, and 14 per cent took on part-time or freelance gigs. Twelve per cent said they delayed having children, and nine per cent chose to move in with family.
The cost of basic living expenses was the main obstacle to saving for a home , cited by 33 per cent of survey participants.
The most common sources of funding among those surveyed were personal savings or cash (71 per cent), a financial gift, inheritance or living inheritance (52 per cent), borrowing from RRSPs (31 per cent), and proceeds from the sale of real estate (25 per cent).