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First-time buyer expectations muted
Saving for the down payment on that detached house in downtown Toronto? Don't bother.
If recent surveys are correct, escalating housing prices are putting detached home ownership in areas like downtown Toronto out of reach for the first-time homebuyer. Don Lawby, president of Century 21 Canada, says first-timers should stop focusing on buying a dream home and concentrate on simply getting into the market. "I think that the reality is you can have your heart set and you can have a dream, but your dream can't be fulfilled as an entry-level buyer the first time."
Lawby is referring to a national survey conducted by Century 21 that finds Toronto to be one of the most expensive markets in the country.
An annual home ownership survey conducted by the Royal Bank found similar results. About 29 per cent of Canadians polled by RBC reported an intention to buy a home over the next two years. Most of those who will be buying (46 per cent) were aged 25-34, suggesting that for many it would be their first. In fact, 41 per cent of those who say they are "likely" to purchase within the next two years are currently renting.
And Statistics Canada data has found a national trend toward the purchase of condos, townhomes and other multi-family dwellings. The number of Canadian homeowners who own a detached single-family house is down 6 per cent from 1996. It all adds up to first-time-buyers having to be prepared to make significant trade-offs if they want to live in prime markets. "Escalating prices mean you're going to get less for your money," he points out.
"What you shouldn't do", Lawby says, "is keep saving in the hopes that the prices will fall any time soon."
There is another option: an advance on inheritance.
"In some cases parents are saying, I have extra money in my home– I'm going to give it to you and you can use it," says Lawby. "I'm going to help you out now but it really is your inheritance down the road.'"
Barring that, Lawby says young buyers should get over the idea that they'll get everything they want on the first go.
"I think we've become an instant gratification community," he says. "People feel more entitled, but the reality is you have a job, you have income and you need to get a mortgage you can service."
February 10, 2008 in Buying Toronto Real Estate | Permalink
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Comments
Most probably the first time buyer is not going to get his/her dream house in Canada's big towns, but they have a good chance in smaller towns. Detailed planning and research is the key to success, therefore I as a Vancouver realtor will do everything to help them!
Posted by: Vancouver realtor | Feb 11, 2008 3:07:17 PM
We are seeing a similar trend in the St. John's Real Estate market. Despite our average house price and Toronto's house price being completely different,($163,00 for Newfoundland compared to $317,000 for Ontario according to the CREA.ca website) the effects are still the same. First time buyers are having to settle for less home for more money, or in some cases getting pushed out of the market completely. As a result we are seeing a lower vacancy rate for rentals in St. John's.
Posted by: Stephen Winters | Feb 11, 2008 2:44:44 PM
It does appear you have captured the market for the next few years for the first time home buyer. This is great because as they move to there first home usually the one selling was to upgrade and there is another sale and good for the economy. Growing naturally like this great.
Unfortunately we are undergoing real estate troubles in US due to a boom in real estate and numerous times interest rates were lowered and some people took out ARM loans and defaulted on them.
Posted by: Melbourne homes for sale | Feb 11, 2008 2:38:17 PM
Sad but true.
I get frustrated watching first-time buyers trying to save 10 or 20% for a downpayment only to see the benefits quickly wiped out by escalating prices. I agree that they should make compromises now to get into the market and then have a real estate strategy to take them to their dream down the road a little.
Posted by: Marg Scheben-Edey | Feb 10, 2008 11:11:35 AM
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