Millennial couple searching for home

First Time Home Buyers Thinking Like Investors

A survey conducted by Pollara Strategic Insights for the Bank of Montreal (BMO) reveals 56 per cent of first-time homebuyers in Canada will rely on family for financial assistance to purchase their home.

New buyers in the provinces of British Columbia and Ontario are most likely to look to family for help – 59 and 58 per cent respectively. That makes sense considering the cities with most expensive housing markets in Canada are Vancouver, British Columbia and Toronto, Ontario.

Millennials (24-39 years old) are more likely to seek help than Gen Xers (40-55 years old), according to the survey. (Millennials have obviously had less time to save for a down payment). Of those seeking assistance, one-quarter are looking for between $10,000 and $50,000. Millennials are seeking $100,000 or more. The average ask was just over $45,000.

Even with the help from family, affordability is a challenge with Canadian banks requiring mortgage holders spend no more than 30 per cent of their monthly income on housing. With the prices of single detached home rising out of reach, first time buyers are stepping into the real estate market with townhouses and condominiums.

The First-Time Home Buyer Incentive is useful for some, though its benefits are limited. The maximum amount the program allows borrows is four times their qualifying income if household income is less than $120,000 per year. That means the maximum amount of a mortgage may be and still be eligible for the incentive is $480,000. That significantly limits the kind of housing first time buyers can purchase in Canada’s more expensive real estate markets.

Many savvy millennials are beginning to think like investors. A pre-construction condominium purchase is becoming more popular among this generation because they can invest in housing now and save money towards the building completion and the closing date. The down payment is paid out over time eliminating the need for an immediate down payment.

Note: The First-Time Home Buyers Survey was conducted via an online survey between August 25 and August 31, 2020, with an online sample of 801 adult Canadians. The margin of error for a probability sample size of 801 ± 3.5% is 19 times out of 20.

 

Reference:

https://newsroom.bmo.com/2020-10-22-BMO-Housing-Survey-COVID-Has-First-Time-Homebuyers-Leaning-Towards-Fixed-Rate-Mortgages-and-Many-Will-Look-to-Family-for-Financial-Help

https://www.ratehub.ca/blog/first-time-home-buyer-incentive

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