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Young families scrimp to own homes in Canada’s big cities, report finds

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Young families in Canada’s big cities believe houses and condos will be a good investment over the next five years, and they are sacrificing their privacy, time and small pleasures to buy them, according to a report by Sotheby’s International Realty Canada.

The study is based on a survey of 1,743 families headed by adults aged 20 to 45. It found that millennials and generation Xers are delaying both retirement savings and paying off credit card and student debt in order to afford homes, with 78 per cent expecting homes to match or outperform other financial investments over the next five years. In Toronto, that number rises to 83 per cent.

A new study found that young families in Canada are delaying both retirement savings and paying off credit card and student debt in order to afford homes.
A new study found that young families in Canada are delaying both retirement savings and paying off credit card and student debt in order to afford homes.  (Sean Kilpatrick / THE CANADIAN PRESS FILE PHOTO)

But the biggest barrier to buying, cited by 33 per cent of families, is the expense of day-to-day living — groceries, rent and utilities. That’s a “concerning” trend, said Sotheby’s CEO Brad Henderson.

“Increasingly, it is the essentials in life that are absorbing most of everyone’s income,” Henderson said. “It speaks to trying to find more higher-paying jobs, more knowledge worker jobs that are able to afford, not just the necessities of life, but some of the things that make life even that much more pleasurable, like a home with multiple bedrooms for a growing family.”

The report is the second in a series of three based on a survey of families in which the adults were aged 20 to 45. Market research firm Mustel Group found 57 per cent of those households in Toronto, Vancouver, Calgary and Montreal were couples with at least one child, 35 per cent had no children, and 8 per cent were single-parent families.

Thakar shares an apartment with a cousin to save on rent, has a side job to earn income in his off-time and has refinanced a student loan. It will take him longer to pay off that debt, but he figures home prices are rising so quickly that it’s important to stash his cash now.

“If you’re not earning money, you’re spending money,” said Thakar, who owns a car but takes transit to his job downtown and questions the expense of a vehicle he doesn’t use much.

“I feel like being prudent at this time might set me up down the road.”

But Thakar expects he might need help from his family to afford a home and, even though he likes his privacy, he would consider a house with a rental unit to help carry the cost.

Among survey respondents, 51 per cent said they saved by cutting down on dining out, 45 per cent reduced their travel and vacation expenses, and 20 per cent delayed retirement savings.

Toronto families were most likely to reduce their car ownership (16 per cent), to freelance or pick up extra work (16 per cent) or to delay having children (15 per cent). Thirteen per cent of Toronto respondents moved in with family to save money, compared to only 5 per cent in Calgary and Montreal.

Henderson says the findings put the lie to the idea that millennials and generation X adults are “live-in-the-moment” people.

“We’re finding they’re acting not too dissimilar to the generations that came before them and forgoing the trips and eating out and all of the things that require additional money, in favour of buying a home for their family to live in,” he said.

When it comes to putting money down on a home, the survey found 71 per cent used personal savings and cash for a down payment. Although 52 per cent of the families relied on a gift or inheritance, those funds accounted for less than 30 per cent of their down payments. Thirty-one per cent borrowed from their registered retirement savings plans (RRSPs).

Young adults have always saved and scrimped to buy homes but a greater proportion of income now goes to paying rent, leaving little for savings, said mortgage broker James Laird of CanWise Financial and online mortgage site Ratehub. It’s why so many young adults end up moving back in with parents.

“We’re seeing a decline in the percentage of young people able to purchase homes versus previous generations,” he said. But the desire hasn’t waned.

“Millennials could be the largest voter base in the federal election and this is the issue we all care about,” said Laird, 34.

He thinks longer amortizations — from 25 years to 30 for buyers with down payments of less than 20 per cent — would provide relief. “It’s a beautiful solution because they qualify for about 10 per cent more mortgage but their payment doesn’t change so they’re no more financially strapped,” said Laird.

Those who borrow from their RRSP still have to pay that money back. Laird said Ottawa should create a homebuyers plan that behaves the same — allowing first-time buyers to access $25,000 of their savings — without the requirement to repay the funds.

The Mustel survey was conducted online in August and September. A random sample of 1,743 is considered accurate within 2.3 percentage points, 19 times out of 20.

Tess Kalinowski is a Toronto-based reporter covering real estate. Follow her on Twitter: @tesskalinowski

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‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Anglais

Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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