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Understanding the Canadian First Time Home Buyer

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Canadian First Time Home Buyer

There is a relocation trend spreading across the housing market in Canada. With this, developers, investors, and real estate agents are all looking for ways to understand the Canadian first-time home buyer.

We’ll give you the tools to do that.

Introduction

After a slow two years, the housing market in Canada, despite the pandemic, has bounced back. December 2020 saw the largest year-on-year increase in over a decade – 47.2% from a year back.

Housing prices are expected to grow further in 2021 – about 4%–6% in the average sales price for residences. There will be continuation of the shortage of housing supply, leading to challenges for homebuyers.

A few statistics for the Canadian housing market:

  • 52% of Canadians think that real estate in 2021 will continue to be among the best investment options.
  • Around 36% would rather work with realtors who use VR/tech for the selling or buying process.
  • Out of 11 major cities, 10 saw house prices rise in 2020, with Ottawa recording the largest increase at a staggering 19.69%. It was followed by Halifax at 16.32% and Montreal at 15.24%.

The national average price tends to be strongly influenced by Greater Vancouver and the GTA sales.

Impact of COVID-19 on the Canadian Real Estate Market

Contrary to the predictions of many economists, the COVID-19 pandemic directly influenced only 6% of Canadians to sell their home. 29% decided they wanted more space. Canadians under the age of 25 are much more likely to fall in this category and to want to move out of their current location.

There is an even split between where Canadians would like to live – rural, suburban, or urban. Roughly 3 in 10 people prefer to live in each area.

The First-Time Homebuyer Incentive

To understand the Canadian first time home buyer, one must be familiar with the first-time homebuyer incentive.

Provisions of this incentive include 5% or 10% for a purchase of a newly constructed home, 5% for a purchase of a resale home, and 5% for purchase of a resale or new manufactured or mobile home.

There are no additional monthly payments, but:

  • Participants must meet the minimum insured mortgage down payment requirements.
  • They must have a qualified yearly income of $120,000 or less.
  • The incentive amount and insured mortgage amount cannot be more than four times the qualified yearly income.

For a deeper dive into the incentive, you can go here

The First-Time Homebuyer Profile

According to Genworth Canada, the average Canadian first time home buyer has three defining characteristics:

  • They are generally in their late 20s.
  • They buy a home valued at $316,100 on average.
  • They put a down payment on a home of 12% of its total value on average.

Genworth Canada also found that 81% of first-time buyers are working full-time, 89% have completed post-secondary education, and 71% are in a married or common-law relationship. They have a higher household income than the national average, with 31% earning a total of over $100,000.

As for spending patterns, a study by BMO found that the majority (60%) have a fixed budget of how much they are willing to spend on a home, but one third is willing to surpass it if it was to land their dream house.

Still, the same study found that 30% of Canadian first-time homebuyers expect assistance from their parents or relatives with the purchase of their first house.

In fact, 60% of those with the intention to buy their first house delayed their plans, with almost 40% blaming the increasing cost of real estate for the delay.

Regional Differences Across Canada

According to Frank Magliocco, Partner, National Real Estate Leader of PwC Canada, “The main message is that every regional market offers opportunities for savvy developers and investors—as long as they embrace technology and anticipate their future buyers’ needs.”

And so naturally, the question on everyone’s minds is: What are those needs?

It’s worth noting the diversity of homebuyers in different provinces and cities – especially in terms of metropolitan vs. non-metropolitan regions.

Globalization has attracted skilled workers and investors from around the world to metropolises like Toronto and Vancouver, causing an influx of jobs and homebuyers in these areas regardless of the national economic climate.

House prices in these areas thus consistently surpass national benchmarks. But nevertheless, the percentage of down payment in these areas also surpasses the national median in Toronto and Vancouver.

But it’s not just house prices that differ. Each city in the nation also has its own unique preference in home type – that is, detached house, townhouse, or condo.

Price variances largely account for the preference for condos and townhouses in Toronto, Vancouver and Montreal, as they are a much less expensive than detached houses when it comes to homeownership.

Particularly for millennials, the largest age demographic of first-time homebuyers, condo living is both a lifestyle choice and a shrewd financial strategy.

Stuart Levings, President and CEO of Genworth Canada, summed it up perfectly in a press release:

“Today’s first-time homebuyers have their eyes wide open, their hands firmly on their pocketbook and are thinking hard before assuming the responsibility of homeownership. This prudence and careful planning should serve Canada’s housing market well as responsible first-time buyers grow into responsible long-term owners.”

Canadian Real Estate Trends

  • Mortgage rates have remained at an all-time low, due to the overnight lending rate being kept at 0.25% through much of 2020. There are plans to maintain this rate until around 2023, when the “economic slack” from the pandemic would have been absorbed.

  • Rental vacancies rose from 0.7% in 2019 to 2.8% in 2020 in condominium-dense markets in October. This resulted from the closure of tourism, immigration, universities and workplaces.

    Rental prices dropped, especially in places popular for short-term rentals.

  • A growing number of homebuyers in major cities such as Toronto have begun prioritizing green space and square footage. Previously, they had favored proximity to the workplace. This is largely due to the pandemic and the consequent growing options for remote work.

    Thus, so-called 18-hour cities are increasing in popularity. These are mid-size cities with a lower cost of living and doing business than the largest urban locations, attractive amenities, and a higher-than-average growth in population.

    Examples of such cities would be Ottawa, Quebec City and Edmonton.

  • The Canadian government is considering a new tax on foreign homebuyers to slow increasing housing prices and curb speculative purchases.

Conclusion

If you’d like to find out more about how we can help your business cater to Canadian first-time homebuyers, check out our services.

BluEntCAD will set up a full CAD studio for you. We offer construction documentation services, architectural drafting services, construction estimation, and as built drawing services. We serve homebuilders, real estate developers, residential architects, architectural and engineering companies and custom home designers.

Given that escalating costs are an increasing concern for homebuilders in metropolitan areas, we will continue to ensure maximum quality in our construction estimation and CAD takeoff services.

Ready to get started? Contact us now!

Maximum Value. Achieved.

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