According to a report by Altus Group, the preponderant reason for the languid housing market this year has been the absence of first-time buyers—but they’ll be back soon and the market will resultantly recover.
“With all the policy changes we’ve had and additional stress testing, they have knocked many first-time buyers out of the market for a while, but part of what they’re doing is saving money. They’ll be back,” said Patricia Arsenault, vice president of research and consulting services at Altus Group. “Particularly among younger renters; they’re inclined to buy homes. Because of their ability at the moment, they’re saving longer and tapping resources from parents to help them out, but they’ll be back in the short-term. There’s nothing out there that says they don’t want to own homes anymore.”
Arsenault added that, by autumn, housing sales will markedly improve.
“People are saving for down payments,” she said. “Savings rates are up in Canada and that money is being used for better down payments.”
The Altus Group Housing Report furthermore elucidates how instrumental first-time homebuyers are to the health of the Canadian real estate market. They account for somewhere around half of all housing sales, but, unlike years past, they have been forced to the sidelines in 2018.
Given the housing market’s interconnectedness, fewer first-time buyers occlude other buyers from moving up the housing ladder.
“The important role that first-time buyers play is that if I’m a repeat buyer trying to move up to something more expensive, I need somebody to buy my house,” said Arsenault. “If first-time buyers aren’t there, there’s nobody to buy my house, so they make the world go around, if you want to put it that way.”
Benjamin Sammut, a Mortgage Architects broker, says first-time buyers are discouraged by stifling regulation and relentless media reports about the latest blow to affordability. Presently in the dead of summer when the market is typically slow, and coupled with buyer fatigue, Sammut expects the fall market to rebound.
He also tries to inculcate in his younger clients other ways to think about homeownership.
“You don’t need to own where you live and you don’t need to live where you own,” said Sammut. “That’s what I’m telling my younger first-time buyers. It’s going to be unique to each individual’s situation, but if you can afford to buy something in a very healthy rental market and you can afford to rent where you want to live, then why not rent the lifestyle and just own a piece of real estate? You don’t necessarily need to own the house and hold off homeownership and real estate ownership until then.”
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