Report says first-time buyers are open-minded: many snapping up older homes under $150,000

Local first-time buyers are better informed than in previous years and are 

entering the resale market as a result of 

low interest rates and a strong economy, according to a report recently released by Royal LePage Real Estate Service. 

In other areas of Canada, first-time buyers will increasingly favour condominiums with the rate of condo purchases projected to double among this group in the next three years, according to the report. 

Locally, the condo trend hasn’t followed the national lead, according to the Winnipeg Real Estate Board’s public relations director, Peter Squire.

Condos as a percentage of MLS®  sales have been holding steady over the last few years at about nine per cent.

“First-time buyers are only a small portion of this percentage because there are more luxury condos available than lower-priced varieties,” he added.  

According to WREB figures, first-time buyers are more likely to purchase a single-family detached home.

On the other hand, across Canada, among those who bought their first property in the past five years, 10 per cent bought condominiums, while 21 per cent of potential buyers intend to purchase one. Detached homes outside of Manitoba are expected to account for a smaller proportion of sales among potential buyers than they have in the past five years.

“The strong economy in Winnipeg and continued low interest rates have made the possibility of homeownership available to many different demographics in the last few years,” said Glenn Ponomarenko, a Winnipeg broker/owner with Royal LePage.

“The current generation of first-time buyers is well informed and has researched the types of homes they can afford and 

areas they prefer.

“With the help of the Internet, first-time buyers have also taken the opportunity to learn more about the different mortgage options available, enabling them to find the most suitable product once they are ready to purchase a home.

“We see most first-time buyers opting for five- or 10-year fixed rate mortgages,” he added. “This allows them to budget what they will be spending towards their home for the next few years, and allows them to lock in at current low rates.”

According to the Royal LePage First-time Home Buyers’ Report 2005, first-time buyers in Winnipeg are mainly seeking properties under $150,000, though they are taking into account a shortage of listing and are more open-minded about the style and type of home they are purchasing.

Entry-level homes being considered are predominately in the southwest, southeast, northwest and northeast portions of the city. 

But, homes in the core area are gaining in popularity, according to the report.

“Many first-time buyers are snapping up the inventory of older homes,” said Ponomarenko, “as move-up buyers are searching for newer homes that do not require renovation.”

The report comprises a national omnibus poll of recent first-time homeowner and buyer attitudes (conducted by Maritz Research) and a market analysis of trends and activity in major markets across Canada.

According to Scotiabank, who participated in the report, strong economic fundamentals, low interest rates and flexible finance programs have made homeownership an attractive prospect for a diverse group of entry-level buyers.

First-time buyers tend to be well informed on most aspects of buying a home, however, the survey found that they demonstrated a need to focus more on long-term planning.

New home buyers and potential buyers were asked: “If you have a $150,000 mortgage and the interest rate increases from five per cent to six per cent, approximately how much more would you pay over the next 10 years?” Thirty-nine per cent of the respondents said they did not know how much they would pay.

Only 18 per cent of respondents estimated correctly ($10,000 to $15,000).

“While they are more knowledgeable than first-time buyers in previous years, they are still largely inexperienced in the complexities of a real estate transaction,” said Phil Soper, president and CEO of Royal LePage Real Estate Services.

“First-time buyers are well aware of the possibility of interest rate increases and factor them into their decision to buy, but their awareness on how an interest rate increase could affect their future finances is surprisingly low. 

“We encourage first-time buyers to take both current and future financial needs into account.”

“Despite the steady rise in home prices in recent years, Canadians’ mortgage servicing costs have remained close to record low levels — thanks to low interest rates and healthy income gains,” said Charles Lambert, managing director of mortgages at Scotiabank. 

“Nonetheless, with interest rates expected to drift modestly higher over the coming year, it’s important that first-time home buyers have a strategy in place to properly structure their borrowing.”

Lambert advises potential homeowners to “do your homework — crunch some numbers and know what you can afford when you go out shopping for that house or condominium.”