Being in your twenties is both exhilarating and stressful. We finish our studies, we start our career, we look for a roof and we think about the future… But it’s not easy when the cost of living explodes, the price of houses soars and the climate plummets, like right now. But was it easier to be the same age in the early 1980s? Third text in a series of five.
This is perhaps the biggest economic challenge for those in their twenties today. It wasn’t easy either in the early 1980s, with the economic crisis and skyrocketing interest rates, but the plan to buy a house, or even just to find good housing at a reasonable seems more and more difficult to reach.
First students at the University of Ottawa, then young civil servants in the federal capital, Henri Vilandre, 27, and Gabrielle Longin, 23, took advantage of the possibility offered by telework to move to Montreal, because they remembered that housing prices were more affordable there. The wish was to find something good, but not too expensive in order to be able to save for the purchase of a house.
“It was a hard awakening, says Henri, who had already lived in the metropolis a few years ago. The prices have gone up a lot. »
Both of them already having a stable job with a “very decent” salary, the young couple had the feeling of being delivered to a housing market where those who were lucky enough to acquire real estate assets while they there was still time to allow themselves to increase their rents when and as they see fit. With rent and inflation rising faster than wages on the one hand, and house prices and interest rates rising even faster on the other, “no matter how much we save, target to be reached is rising ever higher, Henri is alarmed. It becomes demoralizing. We wonder if we will ever get there.
In addition, the couple was not only looking for a roof in Montreal, explains Gabrielle. He also wanted a living environment with public transit, bike paths, services and schools within walking distance, parks and cultural life. “We have a particular grudge against cities designed only for cars. This is not the context in which I want to raise a family, ”says the young woman.
Affordability on the floor
The last time the level of housing affordability was so low in Quebec, as in Canada, was in the early 1980s when monthly mortgage payments for an average Montreal home were 40% of median household income, compared to 49% today, recently reported in a brief analysis by economists Alexandra Ducharme and Kyle Dahms of the National Bank.
It must be said that 40 years ago, interest rates were four times higher than today. In the fall of 1982, a fixed interest rate for a 5-year term fluctuated around 18%. This fall, the rate was about 4.5%.
However, the price of a property is far from being comparable from one era to another. Today, the price of a median home is $545,788 in Montreal, the equivalent of seven and a half times the annual household income. In 1982, its price was $147,331 (in constant 2022 dollars), just over twice the median annual household income.
Another fact to note, when we compare the two periods, the homeownership rate in Quebec is higher today than it was in the early 1980s, even though house prices have increased.
However, the meteoric rise in real estate prices has recently taken a toll on home ownership. During the last census of 2021, the homeownership rate in Quebec was 59.9%, down from the 2016 census, since this rate was 61.3%. The home ownership rate had not fallen below 60% since 2001.
Ceiling interest rates
“In the 1980s, interest rates were extremely intimidating,” recalls Mireille Bonin, who bought her first property with her sister in 1981, when she was 28 and studying in Montreal to obtain her bar. “On the other hand, the sale prices of the houses were extremely attractive, because no one wanted to buy,” she adds.
The two sisters then got their hands on a duplex in the Ahuntsic district of Montreal, bought for about $50,000 at the time (about $170,000 in 2022 constant dollars).
“But it’s true that it was scary,” says Mireille. The world panicked so much that some thought interest rates would go to 30%. So, we took quite a risk, but, in the end, we did well, because it’s the best deal what we did, my sister and I. »
A voucher deal, she considers, because rates quickly dropped and their property resold for more than triple the price five years later.
“But our children don’t have the same luck as me. Not at all,” says Mireille today, worried about her two sons, aged 28 and 35, one artist and the other graphic designer. “We have to help our children because they wouldn’t be able to buy on their own. It makes me very sorry for them, ”she laments. For the moment, her children live in the quadruplex that she and her husband bought in Vieux-Limoulou in Quebec, twenty years ago, when prices were “still reasonable in the neighborhood”.
If Mireille considers herself lucky to have been able to buy a property in the 1980s thanks to her savings when she was still studying, this is not the case for all the twenty-somethings of the time.
The fact that house prices were relatively low didn’t matter to Denys Lamontagne in 1982, when he was 25 years old and had a bachelor’s degree in physical education. It was the economic crisis. His only priority was to find a job, not to buy a house. “It was out of reach. We had no money. I wasn’t even entitled to a credit card. But if we agreed to live simply, there were cheap rents. »
To be continued, in the fourth part of our series: between livelihood and career.