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  • Andrew Cigna

The Harsh Reality of First-Time Buyers: Struggling to Afford the Canadian Dream

Updated: Aug 4, 2023

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Purchasing a first home is an exciting milestone, but it often comes with challenges, especially in a dynamic real estate market like Canada. In a recent survey conducted by Environics Research on behalf of Sagen in collaboration with Royal LePage, the concerns and aspirations of first-time homebuyers were brought to light. This blog post will delve into the key findings of the survey, shedding light on the financial constraints, support trends, and unwavering desire for homeownership among young Canadians.

Insufficient Down Payments Emerge as a Concern:

One of the major concerns expressed by first-time homebuyers in Canada is the sufficiency of their down payments. The survey revealed that 67 percent of those who purchased a property within the last two years expressed worries about missing out on their desired homes due to an insufficient down payment. This represents a significant increase compared to previous years, with a five-point increase from 2021 and a ten-point increase from 2019. Similarly, 63 percent of first-time intenders planning to purchase their first home in the next two years shared the same worry, indicating a three-point increase from 2021.

Phil Soper, the President and CEO of Royal LePage, acknowledged the challenges faced by Canadians entering the real estate market. He cited high-interest rates, strict mortgage qualification standards, and difficulties in saving for down payments within a reasonable timeframe as contributing factors. The stress test introduced by lenders has made it even more challenging for first-time buyers to qualify for lending at higher rates. However, Soper noted that many first-time buyers are leveraging accumulated household savings during pandemic lockdowns to boost their down payments, emphasizing the enduring significance of homeownership.

Financial Assistance Trends:

Gifts and Loans: Given the current market conditions characterized by increased demand and rising home prices, many first-time buyers rely on financial support to secure reasonable down payments. The survey highlighted that approximately 35 percent of respondents nationwide received financial assistance in the form of a lump sum payment from their parents or relatives to contribute toward the purchase of their homes. Additionally, 25 percent of first-time buyers received help with their monthly mortgage payments. Among those who received financial assistance, 46 percent obtained it as a gift, while 37 percent received support in the form of a loan.

Soper explained that without equity to leverage, entering the housing market can be especially difficult, particularly in major cities where home prices are highest. Many first-time buyers have to rely on a financial boost or a loan from parents or family members to help them buy their first property. The assistance received plays a crucial role in bridging the affordability gap and enabling aspiring homeowners to enter the market.

Search for Affordability Leads to Concessions:

As the economic conditions tighten, first-time homebuyers across Canada are making concessions and adjustments to make homeownership more attainable. The survey indicated that 34 percent of first-time buyers reported purchasing homes in more affordable neighborhoods or regions than originally planned. Additionally, 32 percent opted for smaller homes, while 11 percent had to seek financial assistance from family or friends. These choices reflect the willingness of first-time buyers to accept support and compromise on their wish lists in order to enter the market and start building equity.

Among first-time intenders, 31 percent expressed intentions to purchase homes in more affordable areas, and 37 percent planned to buy smaller homes than initially anticipated. Moreover, 16 percent expected to require financial assistance from family and friends. These trends highlight the adaptability and flexibility of first-time buyers as they navigate the challenges of affordability.

Average Age of First-Time Buyers Increases:

The survey findings also revealed a shift in the age composition of first-time homebuyers. In 2023, 24 percent of first-time buyers were under the age of 30, 33 percent were aged 30 to 34, and 43 percent were aged 35 or older. Comparatively, the 2021 survey showed that 29 percent were under 30, 38 percent were aged 30 to 34, and 33 percent were aged 35 or older.

According to Soper, the increase in the average age of first-time buyers is directly linked to the increased cost of borrowing and the unprecedented home price appreciation witnessed during the pandemic real estate boom. These factors have made it more challenging for younger individuals to enter the market at an early age. Soper emphasized the need for government intervention to promptly address the critical issue of increasing housing supply, ensuring that future generations of homeowners are accommodated in the country.

Strong Desire for Homeownership Remains:

Despite the challenges faced by first-time homebuyers, the survey emphasized the enduring importance of homeownership, particularly among younger Canadians. Royal LePage's 2023 Real Estate Investors Report revealed that individuals aged 18 to 34 are more likely to own multiple investment properties compared to those aged 35 and older. This younger cohort also demonstrated a higher likelihood of owning an investment property without owning their primary residence, indicating their strong aspiration to build equity through real estate ownership.

The survey conducted by Environics Research on behalf of Sagen in collaboration with Royal LePage has shed light on the concerns, financial assistance trends, and unwavering desire for homeownership among first-time homebuyers in Canada. While financial constraints and market dynamics present challenges, the adaptability and determination of first-time buyers are evident. Aspiring homeowners continue to leverage support from family and make concessions to enter the market and start building equity. With a strong aspiration for homeownership, younger Canadians are taking steps to secure their financial future through real estate.

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