As outlined in a recent Financial Post article, Middle class net worth has nearly doubled in the past 17 years. What makes up the vast majority of middle-class wealth?
Not savings, nor bonds or stocks; it is real estate (usually in the form of people’s homes.) “Most of this wealth wasn’t in financial assets, of course. It was in the form of a “principal residence.”
However, once we account for inflation (not even REAL inflation, but the modest 2-3% per annum outlined by government trackers), is the middle class better or worse off than they were they were 17 years ago?
Bet your boots, they are worse off…
So real estate has been the main route for them to create and hold wealth. Troublingly though, current generations are having difficulty even sourcing + affording their first home. This is adds insult to injury; and expect things to get worse for most of the middle class not better from here.
How can the middle class fight the slide down the economic ladder when many of our Toronto friends and clients can’t afford a house here, due to soaring prices, the associated large down payment, lack of inventory and/or the current stress test?
I suggest they think about home ownership from creative perspectives: Multi-family, Multi-generational, Co-ownership, Secondary suites, House Hacking, etc.
Don’t envision your home ownership experience to be exactly like your parent’s experience. Get creative, consider owning investment real estate while still renting where you live and/or look outside of your current market.
Getting your foot in the door has become significantly more difficult in the GTA, with cash-flowing properties being nearly impossible to find. Affordability in secondary markets (like Peterborough, Kingston, Durham region, etc.) allow a first time buyer to enter the market or an investor to add multiple properties. These markets still cashflow too. By employing solid strategies, they can allow you to grow and even out pace the market through cash-flow, mortgage pay down and appreciation.
I have put my own money where my mouth is; these are some of the same strategies I have used to grow my family’s portfolio for the last 8 years. I have also assisted many friends and clients to build wealth in this way.
Although the middle class is struggling, that doesn’t mean there aren’t solutions. For those dedicated to bettering their family’s future and bold enough to take action, the climb can be fun and rewarding. Shouldn’t boldness and dedication to a better future be qualities of the Canadian middle class?