More young Canadians financially ready to purchase home

Young home buyers are relying upon financial assistance from their families when buying their first home, according to a new study.

The TD Canada Trust Generational Homeownership Study said over a third of younger Canadians aged 18 to 34 indicated they could not have afforded their first home without help from family, compared to 16 per cent of those aged 55-plus. And 27 per cent said they received money as a gift or borrowed from family/friends to put towards the purchase of a first home, compared to only 10 per cent of those aged 55-plus.

While homeowners of all ages agree that purchasing a house is a solid long term investment, there is a marked difference in today’s 18- to 34-year-old first-time home buyers' actions and attitudes as compared to older generations aged 55-plus when they were first-time buyers of the same age.

Young Canadians aged 18 to 34 are more likely to feel they are financially ready to buy a house than their parents and grandparents were when they were purchasing their first home. 

The TD Canada Trust study reveals a trend by 18 to 34 year olds towards purchasing older homes and a significant increase in young home buyers who are relying upon financial assistance from family to make their home purchase a reality.

When asked what prompted them to consider buying their first home, 51 per cent of younger Canadians said they felt financially ready compared to 37 per cent of older Canadians 55-plus when they were thinking of buying their first home. 

The desire for young Canadians to become first-time homeowners is reflected in the Winnipeg market.

A recent RE/MAX Bricks and Mortar Report said the Winnipeg “first-time buyer segment is currently firing on all cylinders, with rock-bottom interest rates and relative affordability the catalyst behind heightened demand.”

WinnipegREALTORS® president Deborah Goodfellow said the first-time buyer demand is also a result of a strong local economy that never experienced the downturn experienced in other regions of the country.

The TD Canada Trust study said location is the most important factor in buying a home for many younger Canadians. Seventy-eight per cent of those 18 to 34-years-old said that location was a top priority and 70 per cent of Canadians aged 35- to 54-years-old agreed, compared to 64 per cent of Canadians aged 55-plus. Sixty-four per cent of younger Canadian adults purchased their first home in a city, more than the older generations polled — age 35 to 54: 55 per cent; age 55-plus: 50 per cent.

Buying a house is still preferred over condos or townhouses. Both younger Canadians aged 18 to 34 and Canadians aged 55-plus revealed that their first real estate purchase was a house at 65 per cent and 88 per cent, respectively. 

For many younger Canadians life in the city also means older homes with almost half choosing a house over 21 years old for their first home and 35 per cent choosing a home they plan to fix up, compared to 24 per cent of Canadians aged 55-plus.

“A lot of people assume that younger Canadians buying their first home in a city would naturally choose the affordable condo option, but this study shows that this isn't the case,” said Chris Wisniewski, group product manager, Real Estate Secured Lending, TD Canada Trust. “Buying in the city often means choosing an older home that needs work, so many are looking at renovating soon after they purchase.”

WinnipegREALTORS® has noted the revitalization of older neighbourhoods resulting from an influx of young home buyers.

“Young first-time buyers are looking at established neighbourhoods with affordable homes, and are buying these homes with financial assistance from their parents,” said WinnipegREALTORS® market analyst Peter Squire.

“While some are looking for that perfect house, many are willing to put sweat-equity into a fixer-upper in an older established neighbourhood,” he added. 

When today’s 55-plus Canadians bought their first home, paying off their mortgage was a top priority. Today, according to the TD Canada Trust survey, slightly less than half of young Canadian adults agree that paying off their mortgage is a first priority, compared to 64 per cent of Canadians over 55, according to the TD Canada Trust survey.

In Winnipeg, Squire said many young first-time buyers are now willing to carry more debt, especially when two working adults are the home buyers.

For Canadians across all generations, their home is their biggest investment. The study found eighty-eight per cent of Canadian adults 18 to 34, 87 per cent of Canadians 35 to 54, and 78 per cent of those 55-plus all agreed that their first home was an investment for the future. Sixty-four per cent of younger Canadian adults aged 18 to 34 said they put all their savings into their first home compared to 62 per cent of Canadians aged 55-plus and 54 per cent of Canadians aged 35 to 54.

The research revealed that when it comes to getting a mortgage, young adults tend to shop around more than their older counterparts did. Sixty-two per cent of older Canadians were loyal to their own bank and received financing where they were already a customer, compared to 36 per cent of younger homeowners who were more likely to shop around and take recommendations.

“There are so many different options available now, and easier access to information with the use of the internet, that it’s no wonder today’s first-time home buyer shops around a bit more,” added Wisniewski. 

“It's a great idea to look around and see what's available. Thirty years ago when people were looking for financing, they usually had limited choice. Now there are many options to explore with your bank, including a variety of fixed-rate mortgages, variable-rate mortgages, and even green mortgages for buyers who want to lessen their footprint on the environment.”