First-time buyer expectations muted

Saving for the down payment on that detached house in downtown Toronto? Don’t bother.

If recent surveys are correct, escalating housing prices are putting detached home ownership in areas like downtown Toronto out of reach for the first-time homebuyer. Don Lawby, president of Century 21 Canada, says first-timers should stop focusing on buying a dream home and concentrate on simply getting into the market. “I think that the reality is you can have your heart set and you can have a dream, but your dream can’t be fulfilled as an entry-level buyer the first time.”

Lawby is referring to a national survey conducted by Century 21 that finds Toronto to be one of the most expensive markets in the country.

An annual home ownership survey conducted by the Royal Bank found similar results. About 29 per cent of Canadians polled by RBC reported an intention to buy a home over the next two years. Most of those who will be buying (46 per cent) were aged 25-34, suggesting that for many it would be their first. In fact, 41 per cent of those who say they are “likely” to purchase within the next two years are currently renting.

And Statistics Canada data has found a national trend toward the purchase of condos, townhomes and other multi-family dwellings. The number of Canadian homeowners who own a detached single-family house is down 6 per cent from 1996. It all adds up to first-time-buyers having to be prepared to make significant trade-offs if they want to live in prime markets. “Escalating prices mean you’re going to get less for your money,” he points out.

“What you shouldn’t do”, Lawby says, “is keep saving in the hopes that the prices will fall any time soon.”

There is another option: an advance on inheritance.

“In some cases parents are saying, I have extra money in my home”“ I’m going to give it to you and you can use it,” says Lawby. “I’m going to help you out now but it really is your inheritance down the road.’”

Barring that, Lawby says young buyers should get over the idea that they’ll get everything they want on the first go.

“I think we’ve become an instant gratification community,” he says. “People feel more entitled, but the reality is you have a job, you have income and you need to get a mortgage you can service.”