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Millennials struggle to achieve their real estate dreams using traditional investments

A KPMG poll shows soaring house prices and rising personal debt are making it nearly impossible for Canadian millennials — even those with high-paying jobs — to afford a home.

Statistics released by the Canadian Real Estate Association show national home sales set another all-time record in February 2021.

Owning a house has always been a major life milestone, or it used to be until millennials stopped chasing it. Often judged for living in their parent’s basement way past their welcome, millennials have had to delay investment in real estate. In many ways, the traditional model of real estate investment is working against them.

Rising Costs, Student Debt and Complicated Process

Home prices continue to rise, and so does the average age of millennials staying at their parents’ home. In today’s market, young first-time homebuyers juggle student debt, rising home prices, and stringent mortgage requirements.

The most educated generation ever is finding that paying down their student debt is delaying their ability to save up for a down payment on a home. With rising prices, the down payment required keeps increasing.

While real estate is arguably the best source of passive income, small investors cannot enter the market because they don’t qualify for loans, don’t have stable jobs to make regular mortgage payments, or can’t arrange for the down payment.

The complicated path to real estate investing is a barrier for millennials, who seek hassle-free and transparent processes. However, platforms like BuyProperly have created a solution that eliminates the entry barriers to high-yield real estate investments. Learn more about owning a fractional real estate asset here.

Despite being a high yield investment opportunity, entering the real estate market in Canada is considered a pipeline dream by most millennials due to high costs and student debts.

According to a recent Canadian KPMG study, 72% of millennials say their goal is to own a home. The study polled 2,500 Canadians, including 1,000 millennials between the ages of 23 and 38, who are now the most populous generation in the country.

The study also showed that 46% of millennial homeowners received a financial boost from their parents that allowed them to buy a home. Further, 38% believe their house won’t be worth as much in the future.

This data showed that millennials are earning more than earlier generations due to their higher education levels. However, they are not necessarily better off. Purchasing a home has been the most trusted way to build generational wealth, but it is trickier today than ever.

“It seems pretty clear that millennials are in a unique situation in terms of their ability to purchase a home,” says Martin Joyce, Partner and National Leader of Human & Social Services at KPMG.  “Purchasing a home has historically been a foundation for retirement stability.”

For many millennials, the idea of taking on a huge mortgage right after paying off student debt feels like debt deja vu. But a lifetime of renting means that they miss out on the opportunity to invest in the real estate market, which has been the most stable investment pool and retirement fund.

Many millennials save for a down payment and qualify for a loan, but lack the knowledge of the process to purchase and maintain a home. Plus, they’re wary of hidden costs and issues.

Fractional Real Estate Investments

In response to this predicament, new solutions have emerged to tap into the  real estate market. Canada has seen a boom in fractional real estate ownership, which lets you invest in a share of a high-yield property. These properties are selected after stringent due diligence and are selected to ensure high-yield returns so that a small sum can also become a long-term passive income source for millenials.

Khushboo Jha, the founder of the AI-powered fractional real estate investing service BuyProperly, was motivated to begin her own firm after she saw the obstacles in the real estate investment industry for small investors.

“The recent reports are an accurate description of the situation on the ground,” says Jha. “Every day, we meet with clients who have not had access to the market simply because it is designed to welcome high net worth individuals only. Another issue which concerns first-time investors is the fear of putting all their eggs in one basket. That’s why we welcome small investments and help clients diversify their portfolio’’

BuyProperly is a Canadian online exchange that aims to democratize real estate investing by making it accessible to everyone through fractional ownership.

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