Many Canadians are curious as to how our nation’s hotter than ever real estate market and new mortgage qualifying rules have affected individuals entering the Canadian real estate market for the first time. Is buying a home in Canada’s amped up real estate market an unhealthy financial risk for first time buyers? Are less Canadians able to buy their first homes? Recent research done by Genworth MI Canada Inc., Canada’s largest private residential mortgage insurer, indicates that while there are differences by region, first- time home buyers in Canada are doing their homework and have responded well to market conditions and are actually entering home-ownership with solid financial notions and foundations.
In early January 2017, interviews were conducted with 1,803 Canadians, aged 25-40 who purchased their first home and were in their second year of home ownership. The findings were then compared to a similar study conducted in 2015, in order to identify new trends and attitudes in first time home ownership. While there is one significant difference in these findings, most of the results have remained largely the same.
The one notable difference between the 2015 and 2017 studies, is that the proportion of the Canadian population that are first time homebuyers has declined from 7.3% to 5.8%. According to conclusions offered by Genworth researchers, this is likely attributed to the fact that the real estate market in Canada is thriving and home prices are the highest they have been in many years. In city centers like Toronto and Vancouver first time home ownership has taken the hardest hit, as these cities have now been identified as world-class hubs of industry; housing prices in these leading metropolitan centers have come to reflect this designation. Moreover, the stricter mortgage rules brought about in late 2016 have led many potential first time home buyers to need more time to save a full 20% so that they can qualify to get a mortgage.
While there has been a slowing in first time home buying in Canada over the last two years, the Genworth survey shows that generally, there has not been significant change between the 2015 and 2017 studies when it comes to the profile, behaviors and motivations of those who did purchase their first home in Canada. Here are some of the more notable statistics, which have remained largely the same:
* 84% are employed full time.
* 48% are working in private business.
* 61% have a university or postgraduate degree.
* 33% are earning a combined household income of over $100,000.
* 48% of homeowners felt they were in “good financial shape” and have a general notion of what they wanted to achieve with their finances.
* 57% of current homeowners responded that it would be more difficult to buy a home today given the stricter mortgage rules.
* 18% of current homeowners said they would likely not be able to buy a home given the stricter mortgage rules.
Many individuals who said they would likely not be able to buy a home given the current stricter mortgage rules also said they would still attempt to buy a home through a number of strategies including delaying the purchase of a home to save more (53%), cutting non-essential spending (23%), asking for a down payment gift from friends/family (23%), or seeking a down payment loan from a third party lender (16%).
Stuart Levings, President and CEO of Genworth Canada, offered the following statement on Genworth’s 2017 first time home buyer findings, “From the perspective of a mortgage insurer, these first-time homebuyers possess a positive profile which includes full-time jobs and incomes to support their monthly mortgage payments. They are financially responsible and looking for the benefits associated with long-term homeownership.”
According to Genworth’s new 2017 study of first time home buyers, Canada’s robust real estate market and new mortgage qualifying rules have only slightly impacted those entering the Canadian real estate market for the first time in that the percentage of such individuals is now slightly lower than two years ago. Overall, first time home buyers in Canada today share the same traits and behaviors as those buying their first homes two years ago; they are doing the financial and market research, working hard and making sound financial decisions. There are no ifs, ands, or buts about it, Genworth’s research points to the reality that buying your first home in Canada is a wise financial decision and a real possibility for those willing to do the work.
Lara Watson is a journalist and real estate aficionado living in Toronto.
