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Many young Canadians are frustrated their diligent saving hasn’t resulted in a large enough down payment, especially as they grew up in a house that was the family home and that’s the model by which they want to live their lives.

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With housing prices across Canada at an all-time high, financial advisors may be facing uncomfortable meetings with clients who are angry that their diligent saving hasn’t resulted in a large enough down payment. But some say these conversations can also be an opportunity to listen, empathize and run the numbers to help each individual make the right decision.

The real estate market continues to defy gravity. The median price for a home in Canada was up 25.3 per cent year-over-year, to $727,000, in the second quarter of 2021, according to the Royal LePage House Price Survey, with single-family detached homes up 27.1 per cent and condominiums up 11.7 per cent.

That’s leaving many first-time home buyers in despair. According to the Manulife Bank Debt Survey conducted this past spring, 75 per cent of Canadians who don’t own a home say they want to buy one but can’t afford to.

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“[Primarily,] it’s the millennials, the kids who are just coming out of university or in their early 30s, and they’re just trying to figure out how to get into their first house,” says Bill Bell, a financial advisor with Manulife Securities Inc. in Aurora, Ont., who notes that the challenges of getting into the housing market have had the positive effect of prompting clients to introduce him to their adult children.

“They’ve been in bidding wars and lost. They’re saying, ‘I started out with a $750,000 budget, [and] I lost the house because it went for $1-million. Now, I went back to the bank and got a $1-million budget, and I lost because it went to $1.2-million,’” he says. “So, frustration would be the key word, for sure, but also fear – especially for a generation that grew up in a house that was the family home. That’s the model they want to live their life by.”

Conversations stray from the financial as clients wrestle with dreams and struggle to reimagine a future without home ownership, Mr. Bell says. He hears them out and then leads them through various scenarios that may include buying a condo rather than a house, renting for now and buying later, or moving to a more affordable community.

Looking at different models and the resultant effect on their overall financial plan can help ease clients’ fear of the unknown, give them a greater sense of control, and put their decisions in context, he says.

“Our objective is to try to help you live your best life,” Mr. Bell says. “Owning a home is not the only way you have to go. I have several clients who have rented their whole lives … and they’re fine. There’s a financial path that doesn’t involve owning real estate.”

Henry Korenblum, estate and taxation consultant with The Rosedale Family Office at Wellington-Altus Private Wealth Inc. in Toronto, often sees adult children’s home-ownership woes spill over into their parents’ financial plans.

“The children may not be able to qualify through traditional bank financing, and that’s where then they’re looking for other, alternative financing measures, [including] the ‘bank of mom and dad,’” he says. “How can we structure that optimally and also, most importantly, preserve mom and dad’s wealth?”

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When there are multiple children, fairness can be a challenge in a rising real estate market. For example, parents may have helped their first-born child buy a detached home, but that same sum may only support a younger sibling buying a condo today.

Mr. Korenblum says another important consideration is whether to structure home-buying help as a gift (which, when contributed toward the matrimonial home, may end up split in the event of divorce) or as a loan (which can be forgiven, or not, on death). To equalize treatment of siblings, his clients often opt for a promissory note that’s not forgivable, but rather payable to the estate.

“There are ways to equalize that through the will as well, but these are key things that Canadian clients should be thinking through with their advisors,” he says.

There’s no question that shifting goalposts caused by rising house prices have been stressful for young adults, says Tina Tehranchian, senior wealth advisor with Assante Capital Management Ltd. in Richmond Hill, Ont.

“This has been a very unusual real estate market. It’s very long in the tooth. The bull market in real estate has been going on for more than 20 years now, and there were predictions … quite a few years ago [and] at the beginning of the pandemic last year … about how the Canadian real estate market would crash,” she says. “It didn’t happen.”

As housing prices continue to rise, there’s the spectre of rising interest rates on the horizon, which is why Ms. Tehranchian always runs illustrations that test the impact of adding three percentage points to the mortgage rate. Nevertheless, she says a good case can still be made for stepping into the housing market – especially if someone is a risk-averse investor.

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“If you’re a really conservative investor and want to purchase only bonds and [guranteed investment certificates], then, definitely, the real estate route can [put you] ahead down the road even if you pay more upfront,” she says.

“And the good thing about real estate versus the stock market is that you don’t get the statement every quarter. You have no idea what the price of your home is until you want to sell it. For the very conservative investor who doesn’t have the stomach for the volatility of the stock market, real estate actually is still a good long-term investment. Even if they happen to buy it at the peak of the market, as long as their time horizon is 20 years or longer, they’ll do well,” Ms. Tehranchian says.

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