Young Canadian Home Buyers Face Challenges Entering Today’s Market

Apr 12, 2017|Source: Kam Brar

Are you a millennial looking to buy your first home? You’re not alone in the Canadian real estate market. The National Association of Realtors reports that one third of buyers are millennials, and a study of summer 2016 data by Point2Homes Canada shows that the “typical” Canadian home buyer is a millennial woman.

Meet Joan and Her First Dream Home

This statistically average woman – let’s call her Joan – is most likely searching for a 3- or 4-bedroom single-family detached house with a budget between $300,000 – $400,000. Joan wants to live in her preferred neighbourhood, surrounded by amenities and close to work. In fact, she’s probably even willing to pay more to cut down on her commute time according to a recent TD Bank survey.

The survey by TD Bank also shows that two thirds of millennials are unlikely to compromise and buy a smaller home than they desire. Here’s the problem: the average home price in Canada during the time this data was collected was $500,000. In Toronto, Joan would need around $750,000 for the type of home she wants, and in Vancouver she would need close to $1,000,000. The expectations of first-time home buyers like Joan seem to be wildly out of step with the reality of the real estate market in most of the country.

What Can Joan Afford to Buy?

Compounding the problems of reaching that first rung on the ladder of home ownership are the new mortgage qualifying rules set out by the federal government that began to take effect on October 17, 2016. If Joan has saved 10% of her expected purchase price for a down payment ($40,000), she will need a high ratio mortgage; therefore, her qualifying rate will be 4.64% – the Bank of Canada posted rate at the time of writing – even if her contract rate is eventually much less.

If we look at the top end of her search criteria, Joan would qualify for a mortgage on a $400,000 home with an income of $60,000 at a lower contract rate of 2.49%. However, at the higher qualifying rate Joan can only afford a $340,000 home.

Joan would now have to restrict herself to looking at properties in the bottom 25% price range of her initial search, and is even farther from the national average home price.

What Options Does Joan Have?

Joan might choose to stay in the rental market for longer and try to add to her down payment. If she’s fortunate, she might have a relative who is willing to gift her additional funds for the down payment. Joan could also approach her parents to co-sign with her, which would let her qualify for a larger mortgage now but could have implications in the future.

If Joan’s situation sounds similar to yours and you’re interested in learning more about your options, contact an MA agent today!


Kam Brar

Auxilium Mortgage - Mortgage Planner






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