Toronto’s millennials are buying more space than they were a year ago but they are moving farther from the downtown to get it, according to a new report by Royal LePage.

That’s in part due to Canada’s new mortgage stress test, which is adding significantly to the challenge of home ownership among the influential consumer group known as peak millennials, reducing their average purchasing power by 16.5 per cent or about $40,000.

The expensive Toronto and Vancouver housing markets are particularly tough on first-time millennial buyers, says the report published Thursday.

“A peak millennial can purchase a home in Moncton, N.B., for the cost of the 20 per cent downpayment on a home in the market segment accessible to them in the Greater Toronto Area,” says the report.

That challenge is greater since the Office of the Superintendent of Financial Institutions launched new rules in January, says the real estate company. Now even home buyers who have a 20 per cent downpayment must qualify for a mortgage at a rate 2 per cent higher than the current rate or above the five-year benchmark rate published by the Bank of Canada.

So a buyer who might have qualified for a 3.09 per cent loan prior to the stress test now has to qualify at a rate of 5.14 per cent. The same buyer that qualified for a $486,674 home at the 3.09 per cent, can now only buy a $406,479 place.

Dubbed “peak millenials” by a U.S. economist, the cohort born between 1987 and 1998 is considered the most influential group of buyers since the baby boomers. These are the consumers typically launching careers and families.

In the Toronto area, the average home, including condos, detached and semi-detached houses and town homes, sold for $784,558 in March. That compares to about $606,000 on average in Canada.

The average Canadian peak millennial earns $38,148 annually and has a home-buying budget of $203,246. A two-income family — without help from parents or other sources — could afford a home costing $406,479 in the first part of the year. So Royal LePage looked at what millennials could get in different Canadian cities at an entry level range of $325,000 to $425,000.

In the Toronto area that buys an 856 sq. ft. home, probably a condo. But it isn’t likely to be downtown where even condos sell for more than $500,000 most of the time. The average millennial footprint is, however, growing — about 40 sq. ft. larger this year than last — as buyers are forced out of the core to areas where the units tend to be larger.

In Vancouver, a millennial can expect 12 per cent less living space than a year ago.

Their reduced buying power is causing some Toronto-area buyers to reconsider re-sale homes in favour of new construction homes because the 20 per cent downpayment is staggered so they have more time to come up with the money, said Royal LePage sales representative Tom Storey.

“They know they’ll be in a better financial position when the property closes. They’re willing to wait that two or three years for it to come to market just based on what they’ve been approved for now because it’s so competitive in that re-sale market,” he said.

Many singles and couples in the millennial age range will hang on to living and working in the downtown as long as possible. The big compromise for them is location, said Storey.

“I’ve even seen some people that work in the city that don’t want to lose out on the home ownership goal that have actually bought a property outside the city and rent in the city until they’re ready to move outside,” he said.

But most millennials won’t consider moving to a smaller city unless they have a guaranteed job in another place, added Storey.

Even though they can usually afford their monthly mortgage payments, he says almost all his first-time millennial home buyers need help from their parents to afford a downpayment.

“Half of my job is just talking the parents through it, because they’re involved. They’re not just involved financially, they want to come to the showings,” said Storey.

The Royal LePage report shows that the same money buys substantially more property in other Canadian cities. In Ottawa, Montreal or Winnipeg, it equates to nearly 1,500 sq. ft. In Halifax, that price range buys about 1,700 sq. ft. of living space.

In the country’s most expensive market in Vancouver, most millennial buyers have been pushed to the suburbs where $325,000 to $425,000 range would buy about 788 sq. ft. in the first quarter of 2018.

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“While $425,000 will largely net an entry-level condo in Greater Vancouver and the GTA, on the East Coast, this budget unlocks most of the market, offering prospective millennial purchasers large, detached homes with all the bells and whistles,” said Royal LePage CEO Phil Soper.

A CIBC Millennials and Home Ownership poll released Thursday says that 35 per cent of them already own a home, but 94 per cent of those who rent or live with family expect to buy one. Sixty-seven per cent haven’t begun saving, however.

The poll shows that renters save less than those who already own too. Renters had accumulated personal savings averaging $26,058, compared to home owners, who had saved $60,631.