First-time buyers feeling optimistic about the housing market

Not only are Canadian first-time buyers feeling optimistic about the housing market, they are also buying single-family homes. 

BMO Bank of Montreal released the results of a survey conducted by Pollara Strategic Insights, announcing that first-time buyers in Alberta are the most optimistic in the country about buying a new home with more than 50% thinking that now is a good time to do so. More than 40% of first-time buyers in British Columbia and the Prairies also think now is a good time to buy. 

Can’t say the same for first-time buyers in Ontario though with only one-third saying that now is a good time to buy. Fewer than 40% of first-time buyers in Quebec believe that the market currently favours buyers. 

According to BMO, eight of the 11 larger cities in Canada are currently a buyer’s market or balanced (Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, and Toronto). Nearly 50% are looking to buy in Toronto, Vancouver or Montreal. 

BMO also found that 13% of first-time buyers are planning to buy a home that will cost them more than 30% of their income on a monthly basis. Technically, any home that requires more than 30% of your income would be considered unaffordable. Almost 40% of first-time buyers are willing to make sacrifices in other areas of their life in order to afford a more expensive home.

It makes sense that first-time buyers are feeling optimistic because the federal government’s First-Time Home Buyer’s Incentive kicked into action this month. Nearly 90% of first-time buyers believe the FTHBI will be useful, with older millennials in their 30s being the most optimistic.  

That said, saving for a minimum 5% down payment will be a major struggle for more than a quarter of first-time buyers, with another 39% saying it will be a minor challenge. Also, Zoocasa just released a study showing where the FTHBI is useful, and the largest markets aren’t really included. 

"While first-time home buyers believe that market conditions are favourable for buyers, it's important to make sure that carrying the costs are sustainable," says Hassan Pirnia, Head, Personal Lending and Home Financing Products, BMO Bank of Montreal. "What we recommend is coming in and speaking with a mortgage specialist to come up with a plan that will put the buyer in a position to comfortably afford a home and help them understand the criteria for qualifying for the new incentive."

The interesting thing is that this first-time buyer optimism survey came out around the same time as a new report from the Centre for Urban Research and Land Development, which found that first-time buyers are actually buying more detached homes and fewer condos than previously believed. 

During the two years before early 2019, nearly half of first-time buyers in Ontario bought a detached home. When looking at all single-family homes (detached, semis, townhomes), more than 80% of first-time buyers in Ontario purchased, with only fewer than 20% buying condo units. We would have guessed it was the other way around! 

A 2019 Genworth survey found that nearly a third of first-time buyers in Ontario recently bought a detached home, while more than 70% purchased a single-family home. 

So, first-time buyers are feeling good and many of them can afford single-family homes. We’re excited to see what this means for the typically busy fall season!