First-time homebuyers expected to drive the fall real estate market.
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High prices and interest rates be darned.
The next generation of homebuyers in Canada continue to see homeownership as a worthy goal, a new survey shows.
“You also have to understand we’re asking this question during a big real estate slump where prices aren’t rising” at least in Canada’s largest markets like Toronto, says Phil Soper, president and chief executive officer at Royal LePage.
The survey found 84 per cent of respondents generation Z and younger millennials (ages 18 to 38) indicate homeownership is a worthwhile investment in Canada.
In Alberta, 86 per cent indicate it’s still worth it.
That’s compared with 82 per cent in Ontario and 83 per cent in British Columbia, provinces with Canada’s two largest markets — Toronto and Vancouver, where average home prices still exceed $1 million.
Yet Soper notes past surveys found slightly higher percentages in the 85 to 89 per cent range.
“Overall, it’s a different scene in Edmonton and Calgary,” Soper says, noting prices in these cities have been rising, opposed to declining in Toronto.
Key to the health of these markets is affordability.
In Calgary, in mid-September, the average price for all housing types was nearly $614,000, Calgary Real Estate Board statistics show. That’s an increase of about 12 per cent year over year.
By comparison, the national average home price was $649,100 in August, flat from the same month last year.
Yet first-time buyers here have changed housing preferences due to higher prices and interest rates, says a local realtor.
“Prior to COVID, many were able to afford a detached home … priced at $500,000 or less in the suburban communities,” says Trung Bien, a realtor with eXp in Calgary.
Today, most first-time buyers are looking at purchasing a townhouse or condominium.
“They are OK with this because of affordability,” he adds.
The average price of a single-family detached home in Calgary today exceeds $800,000. By comparison, the average price of a condominium apartment in mid-September was about $346,000, up about seven per cent year over year.
Falling interest rates will eventually improve first-time buyers’ purchasing power, Bien says.
So far, lower rates have not translated into more activity. Sales by mid-September were declining while supply grew, year over year.
“The market moving to more balanced conditions is a blessing for many buyers as they are not as likely to compete in multiple offers and don’t need to make a rushed decision with a purchase,” he notes.
In turn, the fall market appears to be a good time for first-time buyers to get off the sidelines, especially as their borrowing costs decline, Soper says, adding this demographic will drive markets across Canada in the coming months.
“First-time homebuyers have long been the dominant cohort of the market for unit sales.”
The survey results show that should continue with so many still pursuing homeownership, Bien says, noting owning a home is part of “our cultural DNA.”
Even as single-family homes are increasingly out of reach, other housing types remain relatively affordable, allowing first-time buyers to build equity.
“A person does have more stability with home ownership versus renting,” Bien says, adding it’s still important for buyers to be price conscious.
“Live within your means … you don’t want to be house poor.”