First-time home buyers are now a strong factor in the Canadian real estate market

A new survey has revealed that first-time home buyers are significant drivers of the current housing market, making up 45 per cent of the 620,000 homes sold in the past 27 months.

While 18 per cent of their down payments are still coming from the bank of mom and dad, 53 per cent are using their own or their co-buyers' personal savings, according to A Profile of Home Buying in Canada, the latest consumer survey report released by the Canadian Association of Accredited Mortgage Professionals (CAAMP).

“There is intense interest in the Canadian housing market, especially from first-time buyers,” said Jim Murphy, president and CEO of CAAMP.

“CAAMP’s spring report focuses specifically on this group and we can say with confidence that first-time home buyers are some of the most engaged, enthusiastic and well-researched groups in the market.”

As outlined in the report, first-time buyers on average are able to put $67,000 down as the first payment on their new home. This represents 21 per cent of their average purchase price, freeing them from the additional cost of mortgage insurance.

When asked whether a change of the minimum down payment to 10 per cent would affect their ability to purchase, 27 per cent of first-time buyers said they would probably not be able to afford their home.

Canadian first-time buyers also shared their reasons for purchasing a home. The most popular reason was to stop renting (51 per cent), while many others claimed that a change in personal circumstance (e.g., getting married or moving out of their parents' homes) and a change in their financial situation (e.g., saved enough money) were their primary reasons to purchase.

Another interesting reason was buyers’ perceptions about the advantages of owning a home, such as providing financial security and the pride of owning a home.

While 47 per cent of first-time buyers are optimistic about the economy in the upcoming 12 months, Will Dunning, the chief economist of CAAMP, expresses concern. Job creation has slowed over the past two years creating a risk that could have a domino-effect on the entire Canadian economy.

Fewer jobs means reduced activity in both the resale market and new housing construction.

Housing demand in much of Canada is also slowing, with resale activity moderating or prices flattening, with the exception of major markets like Vancouver and Toronto where skyrocketing prices are due to issues of supply and demand.

“Overall our local market is balanced and offers plenty of choice for discerning buyers to find their preferred property,” said WinnipegREALTORS® president David MacKenzie.

Profile of first-time buyers:

• Most are between 25 and 34 years old.

• About half have household incomes below $80,000, while one-third have incomes of $100,000 or more.

• Average price spent on a home by first-time buyers is $308,100, and the most common price range was between $200,000 and $249,999, a common price range in Winnipeg.

• The largest source for down payments in all buying groups including first-time owners is personal savings.

• Withdrawals from RRSPs made up 10 per cent.

• TFSA withdrawals were highest among first-time buyers at five per cent.

• Most first-time buyers purchased single-detached homes (47 per cent), followed by condominiums (22 per cent).

• On average, most buyers expected to shorten their amortization by five years, although first-time home buyers thought they could shorten their payment period by 4.3 years.

• First-time buyers gave the most consideration of all buyer groups to interest rates increasing in the future.

 • First-time owners consulted an average of 1.2 mortgage professionals and obtained 1.7 mortgage quotes; 61 per cent consulted a mortgage broker and 39 per cent said they obtained their mortgage from the broker.

• Seventy-nine per cent of first-time buyers were employed full-time and 82 per cent were confident their employment was secure.

• Sixty-four per cent of first-timers consider a mortgage “good debt.”