First time buyers in Canada are helping to fuel strong gains in the property market as they seek to get a rung on the housing ladder before interest rates rise, it is claimed.
Almost a third of 19 major Canadian markets are reporting a greater number of sales than the same period in 2010, with 70% saying average selling prices have increased, according to the latest report from real estate agency RE/MAX.
The gains are being led by the Greater Vancouver area where prices have increased 20% so far this year, the report shows. Hamilton Burlington followed Vancouver in posting the biggest gains with an 8% jump year on year, followed by Quebec City, Winnipeg and Toronto.
It points out that the strong gains are being fuelled more by a desire of first time buyers to take advantage of low borrowing costs than a rush to jump into the market ahead of changes to mortgage lending rules that tighten criteria for new homeowners.
‘With the Canadian economy on firmer footing overall, residential real estate is well positioned moving into the traditionally busy spring market,’ said Elton Ash, regional executive vice president, RE/MAX of Western Canada.
‘Consumer confidence is climbing in conjunction with economic performance, and concerns over a secondary recession fade with each passing day. The mood is cautiously optimistic, as first-time buyers enter the market,’ Ash added.
RE/MAX said affordability remains a concern, however, and first time buyers are scaling back their expectations on factors such as size of the property and location in order to be able to buy a home.
The lack of affordable housing for lower income and first time buyers is something that has been noted by planners and builders. There is a change in the country’s housing mix towards much smaller homes and condo units, it said.
Inventory levels, while tight in several larger centres, are more balanced overall, giving first time buyers a good selection of housing product from which to choose, the report also shows.
Condominium apartments and town homes have become the first step for many entry level purchasers, especially in Greater Vancouver, Victoria, Kelowna, Edmonton, Calgary, London-St. Thomas, Hamilton-Burlington, Greater Toronto, the Island of Montreal, and Halifax-Dartmouth where average prices have risen unabated in recent years.
‘Despite homeownership rates approaching 70%, there is clearly room for growth as entry level buyers make their moves from coast to coast, undeterred by higher housing values and changes to lending criteria,’ said Michael Polzler, executive vice president, RE/MAX Ontario-Atlantic Canada.
‘Many purchasers intent on realizing homeownership are scaling back on expectations or are willing to sacrifice location, quality and/or size to make their dream a reality, not unlike generations before them,’ he added.
The growing demand for reasonably priced properties is creating a shift in the country’s housing mix. That trend is expected to gain traction in coming years, as builders look to create greater options for those seeking to realize homeownership, it adds.
‘While market conditions are one thing that influences first time buyers, few things trump the fundamental belief in homeownership,’ said Sylvain Dansereau, executive vice president, RE/MAX of Quebec.
‘Today’s entry-level buyers are steadfast in their mindset. They know they have to live somewhere, but they simply don’t want to pay someone else’s mortgage. Savvy or practical, they remain a driving force. The bottom line is that the demand for entry-level product will remain steady. The role of starter homes in the marketplace is becoming ever more vital,’ he added.