Saving for a home means ownership may be a distant dream

Prices are running away from first-time buyers as home values are accelerating in many major Canadian markets

Saving for a home means ownership may be a distant dream
Steve Randall

It’s most Canadians’ largest single investment and one that generally continues to deliver solid returns.

But the dream of homeownership for millions of would-be first-time buyers is fading as saving for a down payment becomes harder amid fast-rising house prices.

A report from TD Bank highlights how Canada’s housing market is red hot compared to the US. While Americans are either hailing or hating a 16.2% increase in prices year-over-year in March depending on whether they are buyers or sellers, Canadian prices have surged 32% in the same period.

Private mortgage insurer Sagen and real estate brokerage Royal LePage have published a new report today (May 14)  that shows the extent of the struggle for those wishing to get on the housing ladder.

Three quarters of first-time buyers in Toronto say they are anxious that they won’t have a large enough down payment to buy a home, up from 68% in 2019. This trend is mirrored in Vancouver where 69% are worried (up from 58%) and in Montreal where 63% are concerned (up from 60%). The national average is 62%.

There have been some winners of course. For those buyers that got in early, the last year has benefitted them thanks to fewer expenses and the low cost of borrowing. But the surge in sales has driven prices higher.

"Although COVID-19 has impacted first-time buyers across the country, many have been able to save and buy their home sooner than expected," said Stuart Levings, president and CEO of Sagen. "The hurdle causing anxiety for first-time homebuyers is saving for a down payment in an environment of rising home prices in many parts of the country. While some have parents who can step in, many do not and they are struggling to get into the market."

Staying with parents

Asked about their living arrangements before buying their first home, 25% were living with parents or other relatives, with half paying rent to them, although 34% of those were paying below market rates.

The combination of the pandemic and inability to buy a home is having a knock-on effect for some seniors who may have been considering downsizing.

Fifteen per cent of respondents who lived at home said that doing so delayed their parents' own decision to downsize, while a further 15% said their siblings would have to leave the nest before their parents could move and 63% said their parents had no plans of downsizing when they become empty nesters. This was not much different from the 2019 survey.