With mortgage rates making it a buyer’s market, first-timers are getting off of the sidelines and taking advantage of the favourable climate while they still can, based on new survey data from the Canadian Association of Accredited Mortgage Professionals.
Over the past two years or so, approximately 620,000 single-family residences have been sold in Canada according to CAAMP. Forty-five percent of these new buyers were first-timers.
With many first-time home buyers being freshly out of college or high school, they typically don’t have the type of earnings that allows them to put a substantial down payment on a house, helping them to get out from under their mortgages more quickly. The average amount put forth on a down payment is $67,000 for first-time owners, according to CAAMP statistics, which accounts for roughly 21 percent of the typical purchase price.
Over 6 in 10 Canadians consult mortgage broker
Buying a home is likely the biggest expense that first-timers have ever – or will ever – invest in. The average price spent on a home in today’s market is $308,100, CAAMP reported, with the most common price range being between $200,000 and $249,000. At 47 percent, single-detached homes is the most popular housing style, followed by condominiums at 22 percent. This is particularly true in Ontario and British Columbia – Canada’s first- and second-most populated provinces, respectively – where condo ownership is the highest.
Because purchasing a residence is so consequential, it’s not something that first-time buyers take lightly. The average prospective owner consults 1.2 mortgage professionals before obtaining a mortgage and requests approximately two different quotes, according to CAAMP. More than 6 in 10 consult a mortgage broker, with nearly 40 percent also getting their mortgage from said broker.
Starts up slightly in May from April
The growth in the first-time home buying market has cut into the nation’s housing supply, which may explain why residential construction projects tracked higher in May. Housing starts in Canada totaled around 181,230 units during the month, up slightly from the 179,520 during the previous month, according to the latest available data from the Canada Mortgage and Housing Corporation.
Bob Dugan, CMHC’s chief economist, said that the uptick was largely spurred by growth in multiple start projects in Ontario and the Atlantic region.
“Despite month-to-month variation in multiple starts, CMHC expects builders will continue to focus on managing inventory of completed but unsold units – inventory that is still above historical average,” Dugan explained.
Though nearly half of the nation’s buying activity has been driven by first-time owners, Dugan said that a slowdown may be in the offing, which if experienced would trigger fewer groundbreakings.
“CMHC also forecasts slight moderation in housing starts in 2015 and 2016, reflecting a slowdown in housing market activity in oil-producing provinces that will partly be offset by increased activity in provinces that are seeing the positive impacts of low oil prices,” Dugan pointed out.