Despite lower interest rates, more inventory and softening home prices in major cities, economic uncertainty is prompting many Canadian first-time homebuyers to put their plans on hold, a Royal LePage survey has found.
According to the survey of Canadian real estate professionals working with first-time homebuyers, 15 per cent of prospective homebuyers in Ontario are working towards purchasing their first home in the next two years. But among them, about 80 per cent are planning to buy in one to two years while just 20 per cent plan to buy in the next 12 months.
Royal LePage sales representative Tom Storey, who is based in Toronto, pointed out that, with lower interest rates, more people can qualify for a mortgage to buy their first home.
Still, many prospective buyers would “rather see prices bottom out and go up for a few months” to know they’re buying at the right time, Storey said.
“No one wants to buy, and then the property two months later is worth less than they paid for it,” he said. “That’s a huge mental hurdle, which makes a tonne of sense.”
Many people are pre-approved for a mortgage and watching the market, waiting for something “perfect,” Storey noted, but they’re in no rush.
“This is the type of market we’ve wanted for a long time for buyers; we just didn’t think there would be so much uncertainty going around it,” Storey said. “The sales volume continues to be pretty low.”
Affordability is still a challenge, Storey said, adding he’s never worked with so many first-time homebuyers who are above the age of 35.
“Prices have gone up so quickly for so many years leading up to what’s happened recently where they finally dropped again,” he said.
Buyers who are ready to get into the market tend to be people over the age of 35 who have been renters for about a decade in rent-controlled units priced “well below” market value, Storey said.
“Now they’re finally saying, ‘I know my rent’s low, but prices and interest rates have dropped, and I just want to own my own place,’” Storey said. “It’s actually in the buyer’s favour. There’s lots to choose from.”
About 43 per cent of first-time homebuyers in Ontario will receive financial assistance to make their purchase, the survey found.
“In most circumstances for first-time homebuyers, they’re getting some type of help, usually in the form of a gift of funds,” Storey said.
More than half of Ontario respondents — 54 per cent — plan to purchase a single-family detached home, while 21 per cent intend to buy a condo and 14 per cent plan to buy a townhome or semi-detached house.
The budget for about 73 per cent of them is between $500,000 and $750,000, the survey found.
While that budget might be misaligned for a detached house in Toronto, there are areas outside the GTA where it’s very reasonable, Storey said.
In Toronto, probably more than 80 per cent of first-time homebuyers purchase condos, he said.
About 54 per cent of first-time homebuyers plan to have a down payment of at least 20 per cent, the survey found.
