Sales volumes may have been down these past few months, but the intent to buy a home across the country has significantly increased. According to a recent poll done by RBC Homeownership, one-third of Canadians are likely to buy a home in the next two years. This number, up from seven percentage points from last year, is the highest level since 2010.
Millennials (aged 18-34) are beginning to recognize the benefits of homeownership, and are becoming eager to buy their first homes. Feeling less angst about the economy and more confident about employment, Generation Y expressed the strongest intent to buy, with 50 per cent stating they were very or somewhat likely to purchase within the next two years. While relatively high home prices may be discouraging, many young professionals between the ages of 25-35 are still motivated to own a property, the majority realizing that if they do not act soon, they may be priced out over time.
Despite the inclination to purchase, many Canadians (including Gen Y) are struggling to come up with the money to secure a down payment. With tougher mortgage qualifications in place, paired with rising interest rates, over one-third of Canadians have indicated they will look to their families for financial assistance. 61 per cent of surveyors are also concerned about the rising interest rates, this number being up 10 per cent year-over-year. 55 per cent of the individuals polled indicated that the new stress test guidelines are impacting their purchase decisions, with 25 per cent having to make higher down payments, 19 per cent delaying their home purchase, and 18 per cent moving to a different location in order to find an affordable home.
Since the government introduced these cooling measures, the market has experienced the rippling effects. The impact has largely been noticed on luxury detached homes, with sales plummeting 41 per cent in February from the same time last year. Prices have also dropped 12 per cent compared to 2017, while condominium apartments soared, seeing nearly a 20 percent increase since last February. Because of the new regulations many condos are drawing in multiple offers, especially from millennials. The rule, which requires that even buyers with a 20 per cent down payment, must prove they can make payments at least two percentage points above the rates under which they go into contract. As a result, it is negatively impacting buyers purchasing decisions towards detached homes, pushing them into the condo market, where there is more of a “starter-home” price range. As of February, average prices of condos across the Greater Toronto Area were sitting at $529,782, while detached homes were averaging $1,000,736. With this price difference, it is no surprise more Canadians are opting for the condo lifestyle.