First-time buyer activity dropping as housing market rebounds Image

First-time buyer activity dropping as housing market rebounds

By Newinhomes on Nov 18, 2019

With the majority of the year behind us, it looks like the Canadian housing market bounced back in 2019, but we can’t say the same about first-time buyers. 

According to the results of the Canada Mortgage and Housing Corporation’s annual Mortgage Consumer Survey, the percentage of buyers who were first-timers dropped from 56% in 2018 to 47% in 2019. 

"The mortgage consumer survey's goal is to help put Canadians and the mortgage professionals who serve them in the best position to succeed when shopping for a mortgage," says Sam Carnavole, CMHC's Director of Client Relationship Management. "This year's survey includes important takeaways on affordability and the first-time buyer's journey from renting a home to owning one. We hope the survey helps Canadians get the most of what can be an overwhelming process."

Most of the first-time buyers in Canada in 2019 were aged 18-34 and living in Ontario. More than a third of first-time buyers rented for more than 10 years before buying. In 2018, 39% were renting on their own before buying, and this year, that cohort dropped down to 23%. In fact, 44% of first-time buyers were renting with family or friends before buying, which is much higher than 28% in 2018. 

Looking at all buyers, 60% spent the max they could afford, which is actually down quite a bit from 78% last year. The mortgage stress test likely had a little bit to do with this. Everyone’s borrowing power was weakened, so many buyers probably lowered expectations and budget. CMHC says that 65% of buyers believe the stress test will prevent more Canadians from taking on mortgages they can’t afford (which is a good thing). 

The top must-haves when buying a home were affordability (80%), the number of rooms (73%), and close proximity to transit (67%). Nearly 60% of buyers cut back on non-essentials since buying. The most common cutbacks were in entertainment (66%), vacations (55%), and food (44%). 

As the market rebounds with sales activity and prices on the rise again, we wonder if first-time buyers will continue to fall off through 2020. This would put tremendous weight on the rental market! 


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