Most Canadian First-Time Home Buyers Anxious They Will Miss Out Because of an Insufficient Down Payment
- While Vancouver has higher home prices, first-time home buyers in Montreal are more worriedabout their down payment (58% vs. 60%)
- First-time home buyers in Toronto had the highest anxiety that theirdown payment would not stretch enough to buy the home they wanted (68%)
- Of first-time home buyers who lived with their parents before buying, almost one-fifth said that remaining at home delayed parents’ decision to downsize
- Despite higher median home values, Toronto (59%) and Vancouver (54%) respondents are most likely to prefer proximity to work over square footage than new home buyers in other regions studied
TORONTO, May 9,2019 – A survey released by Genworth Canada, the country’s largest private residential mortgage insurer, in collaboration with Royal LePage, Canada’s leading real estate services provider, analyzed key trends among first-time home buyers who purchased a home within the last two years.
Fifty-seven per cent of respondents nationwide said that before buying their home they worried they might miss out on a property they wanted because of an insufficient down payment. While Montreal’s median home price is one third of that in Vancouver, respondents in Montreal reported being more worried (60%) than respondents in Vancouver (58%). Toronto respondents had the most anxiety (68%).
“While interest rates remain historically low, it is not surprising that first-time home buyers in Montreal are increasingly concerned about their down payment,” said Phil Soper, president and chief executive officer, Royal LePage. “Montrealers have been watching home values escalate over the past three years. Many are wondering if they have time to grow their down payment or if they should get in the market now as prices continue to rise.”
When asked to describe their housing situation before purchasing a first home, 25 per cent of respondents nationwide lived with parents or relatives. Forty-three per cent of those living at home paid rent to their families and of those paying rent, 30 per cent paid less than the market value.
One-fifth of respondents who lived with family said that living at home delayed their parents’ own decision to downsize (17%), while a further 15 per cent said that younger siblings would have to leave the nest before parents can downsize. Sixty-four per cent said their parents had no plans of downsizing when they become empty nesters. These results support findings in Royal LePage’s 2018 Baby Boomer release that revealed although many Boomers still have children living at home, 17 per cent of them are expected to purchase a property by 2023, representing 1.4 million potential buyers and sellers.
As affordability continues to challenge many first-time home buyers across Canada, 48 per cent of respondents would rather have a smaller home and live close to work, compared to 32 per cent who value larger properties despite a longer commute. Findings were similar in Calgary and Montreal, where 53 and 52 per cent of first-time home buyers also preferred less time commuting between home and work.
While Toronto and Vancouver are home to some of the highest home prices in the country, the majority of those surveyed in both cities responded that proximity to work was more valued than square footage (59% and 54%, respectively). This may be influenced by longer work commutes, with Toronto and Vancouver residents reporting 34 minute and 30 minute one-way travel times both to/from work.
“Even in cities where first-time home buyers have to push themselves to get on the property ladder, cost isn’t the only consideration when buying a first home,” said Soper. “While some young people are relocating to more affordable cities, those who stay value shorter commutes and access to the benefits of city life.”
Sixty per cent of respondents in Ontario expressed anxiety about their down payment stretching enough to get the home they wanted, compared to 68 per cent of respondents in Toronto.
“Buying a property can be stressful for anyone, but for first-time home buyers, the anxiety is magnified by the unknowns,” said Caroline Baile, broker, Royal LePage Your Community Realty. “A good starting place is to define your wishlist and focus on your priorities.”
Shorter commutes were valued more than square footage in Toronto as 59 per cent of respondents in the region preferred a more expensive and smaller home located closer to where they or their spouse work — the highest regional percentage in Canada.
“There is a large portion of first-time home buyers in Toronto who will sacrifice size for location. Time is important — as are childcare, schools, and proximity to work,” said Baile. “Sometimes that means purchasing a condo in the city within walking distance of work, or even living with parents a little longer to position themselves better to get the home they want.”
Thirty per cent of respondents in Ontario and 34 per cent in Toronto lived with parents or other relatives before buying their first home, surpassing the national average (25%).
Fifty-one per cent of respondents in Quebec (excluding Montreal) expressed anxiety about their down payment stretching enough to get the home they wanted, compared to 60 per cent of respondents in Montreal.
“While those who live in other parts of the province have the convenience of time and can shop around, we are seeing that first-time home buyers in Montreal are feeling the pressure to make quick decisions to enter the market,” said Dominic St-Pierre, vice president and general manager, Royal LePage, for the Quebec region. “Low inventory and high demand have encouraged an increase of multiple offers in the city in favour of more experienced buyers. First-time home buyers have to be prepared and secure financing prior to making an offer, with a sufficient down payment and mortgage pre-approval if they are serious about a purchase.”
Nearly one quarter of Montrealers (23%) lived with family prior to buying their first home, compared to 16 per cent elsewhere in Quebec. Compared to the rest of the country, Quebec is the province with the most significant gap between the largest urban centre compared to the rest of the province when it comes to first-time buyers paying rent to their parents before purchasing their own home. Seventy-four per cent of respondents in Montreal said they did not pay rent to their family or relatives compared to only 53 per cent of Quebecers (outside Montreal).
Fifty-six per cent of respondents in British Columbia expressed anxiety about their down payment stretching enough to get the home they wanted, compared to 58 per cent of respondents in Vancouver.
“Early generational wealth transfer from downsizing Baby Boomers has given a financial boost to first-time home buyers,” said Adil Dinani, real estate advisor, Royal LePage West. “Despite some softening in prices, first-time home buyers are optimistic about the long term health of the region’s real estate market.”
Twenty-seven per cent of respondents in British Columbia lived with family before buying a home. Fifty-eight per cent of those living at home paid rent to relatives, and of those paying rent, 45 per cent paid below market rates.
Of the respondents who lived at home before buying, 14 per cent said that living at home delayed their parents’ decision to downsize.
Forty-six per cent of respondents in B.C. chose to buy a more expensive, smaller home located close to where they/their spouse worked compared to 54 per cent of respondents in Vancouver.
“There will always be an attraction to buy in the city centre. In Greater Vancouver, there are newly-developed urban amenities and transportation infrastructure that increase the desirability of homes outside the core,” said Dinani. “These high density hubs create opportunities for people who are new to the market; they can embrace urban living with more space and connection to transit.”
Forty-nine percent of respondents in Calgary expressed anxiety about their down payment to get the home they wanted, compared to 62 per cent elsewhere in Alberta.
Among Calgarians living with family before buying a home, 47 per cent said their parents did not have plans to later downsize. Twenty per cent of respondents said staying in the home did delay their parents’ decision to downsize while 31 per cent indicated they had siblings who would need to move before parents could downsize.
“There’s definitely more opportunity in Calgary,” says Corinne Lyall, broker and owner, Royal LePage Benchmark. “You have a larger population of younger people who are very career-focused, with more buying ability. There are also a number of Baby Boomers who are in a position to help their millennial children purchase their first home.”
Forty-two per cent of those surveyed in Calgary said their home location represents a similar commute for both spouses/partners, representing the highest percentage compared to other regions. The national average is 36 per cent.
The Atlantic Canada region bucks the trend for anxiety in relation to their down payment. Fifty-four per cent of those surveyed said they were not worried about their down payment compared to 41 per cent nationally.
“Home prices are not outside the reach of younger Canadians in Atlantic Canada. We still see buyers getting help from ‘the bank of Mom and Dad’ but there’s fantastic affordability and opportunity here,” said Marc Doucet, broker of record, Royal LePage Atlantic.
Seventy-four per cent of those surveyed in Atlantic Canada rented before purchasing their first home. Twenty per cent of respondents in Atlantic Canada lived with family before buying a home; 54 per cent paid rent to relatives, while 17 per cent paid market rates. Among those respondents who lived at home before buying, 20 per cent reported their parents delayed plans to downsize until the respondents moved out of the family home.
Fifty-seven per cent of first-time home buyers in the Prairie provinces were worried about their ability to get the home they wanted with their down payment.
When it came to proximity to work, 39 per cent of respondents in Manitoba and Saskatchewan preferred a relatively more expensive, smaller home in exchange for a shorter commute.
“Where you live dictates how you live,” offered Michael Froese, broker and managing partner, Royal LePage Prime Real Estate. “A lot of first-time home buyers are looking at their purchase not just as a home, but as an investment as well. When it comes to resale value, choosing a good neighbourhood is part of the decision. You can always improve the house; you can’t change the location. Good advice for new home owners is to budget for some renovation and repairs.”
Among those living with family before buying a home, 71 per cent said their parents did not have plans to later downsize. Thirteen per cent of respondents said staying in the home did delay their parents’ decision to downsize while 7 per cent indicated they had siblings who would need to move before parents could downsize.
Thirty-six per cent of respondents in the Prairies paid rent to families at below market rates before purchasing their own home, slightly higher than the national average of 30 per cent.
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About the Survey
A total of 1,893 interviews were conducted by Environics Research with Canadians aged 25-40 who had purchased their first home within the prior two years. Online interviewing was completed between February 15 and March 15, 2019. Quotas were set to oversample in urban regions with weighting to bring them back into overall national proportions for reporting.
About Genworth MI Canada Inc.
Genworth MI Canada Inc. (TSX: MIC) through its subsidiary, Genworth Financial Mortgage Insurance Company Canada (“Genworth Canada”), is the largest private residential mortgage insurer in Canada. The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time home buyers. Genworth Canada differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For more than two decades, Genworth Canada has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system. As at December 31, 2018, Genworth Canada had $6.9 billion total assets and $4.1 billion shareholders’ equity. Find out more at www.genworth.ca.
About Royal LePage
Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of more than 18,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women’s and children’s shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE.
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