Canada’s largest and most expensive cities have become notorious for pricing out millennials, but a new report from the Royal Bank of Canada (RBC) reveals that the number of 20- to 34-year-olds in Toronto, Montreal, and Vancouver, is actually swelling — and it’s keeping housing demand strong.
According to the report from RBC senior economist Robert Hogue, millennial populations in these three cities are “growing at a healthy clip” and the majority of these millennials are coming from abroad.
When looking at the combined millennial population in all three cities in 2018, there’s an increase of 96,000 — the strongest increase over the past 12 years.
In fact, “for every millennial leaving a major Canadian city for more affordable digs in the same province, there are between seven and 12 millennials moving in from another country or province.”
What’s pulling millennials toward these cities when their high cost of living — especially in Vancouver and Toronto — is often cited as being the thing driving so many of them away?
These cities are “magnets for young, mobile talent,” Hogue said. “This is the dominant force shaping the urban demographic make-up, not the loss of millennials priced out of the market.”
In fact, Hogue said that tales of millennials fleeing Canada’s most expensive cities in droves have been largely exaggerated.
The millennial population in Vancouver, Toronto, and Montreal grew 2.9% in 2018 — the strongest increase these cities have seen in the past 12 years.
Toronto’s millennial cohort has grown the fastest during that time, with a 58,000 rise, followed by Montreal (up 22,000), then Vancouver (up 16,000).
The millennial urban exodus might be overemphasized, but it’s still happening. Hogue said that increasingly, millennials are moving to other parts of their respective provinces, and usually not that far away from the city they left behind.
GTA millennials, for instance, tend to gravitate toward places like Hamilton, St. Catharines, Oshawa, Kitchener-Waterloo, Guelph, and Barrie.
“While we don’t know for sure who is leaving and why, it’s reasonable to assume the search for more affordable housing is a big factor,” Hogue said. “Buying a home is between 25 per cent and almost 50 per cent cheaper in the Southern Ontario communities to which many Torontonians flee.”
In 2018, for instance, “there were 13,200 more millennials leaving Vancouver, Toronto and Montreal to areas within the same province than millennials making the opposite move last year. That net outflow more than tripled since 2015,” said Hogue. “The increase was almost eight-fold in Vancouver.”
How will housing demand stand up to all this coming and going of the next homebuying generation?
“Despite some churn in the prime household-forming population, future housing demand isn’t under threat in Canada’s largest cities… What could fall, however, is the rate of young households who own a home.”
So while millennials from abroad might keep demand for houses high, that doesn’t mean they’ll be able to afford those homes anytime soon.
“High housing prices set an impossibly high bar to clear for many millennials to become homeowners in a big city.” said Hogue. “Expect a greater proportion of them to rent in the future.”