Next generation of homeowners cautiously optimistic about economy and housing market, economic confidence main driver for purchasing decision
Mortgage Professionals Canada releases Spring Survey that provides a unique portrait of Canadians under the age of 40 who don’t currently own a home but expect to own in the future
Little has been reported about the group of Canadians just outside the housing market, sitting on the sidelines, thinking about buying or remaining renters. In this new Spring Survey, The Next Generation of Homebuyers, Mortgage Professionals Canada steps into the future to look at what these perspective homebuyers are thinking when it comes to investing in a home.
The report segments Next Gens into three categories based on their purchase time horizon: Distant Buyers looking to purchase beyond the next five years who may be less informed about the housing market conditions and the process involved in purchasing and financing a property; Mid-term Buyers looking to purchase in one to five years; and Imminent Buyers who are looking to purchase in the next year.
The majority of Next Gens feel that Canadian real estate is a good long-term investment and 72 per cent view having a mortgage as good debt. They have other debt to consider, however, before they’re ready to purchase. Young Canadians today are carrying heavier student loans than any previous generation. They also want to continue saving for a down payment or are waiting for important milestones in their lives like a promotion or marriage. These factors together with the high costs of homeownership are causing a majority of Next Gens to delay their purchase to sometime in the next five years.
“We found that there is a strong interest in homeownership among Next Generation Homebuyers but they are waiting until they feel financially secure,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “They are cautious as they save for the future. In the next few years, we expect to see an influx of first-time buyers who know exactly what they want from their first home.”
With average household incomes of $75,000 and average savings of $27,000, 61 per cent of Next Gens expect to make a down payment of less than 20 per cent of the purchase price of their home. Increasingly more self-reliant, this group is also expecting to front their down payments themselves, with 73 per cent relying on their own personal savings and only 36 per cent relying on gifts or loans from family.
Despite the increased price, Next Gens are hoping their first homes will be a low-rise dwelling (80 per cent), over a condominium (18 per cent). The majority are looking for detached homes (59 per cent), while 13 per cent are pursuing a townhouse or eight per cent a semi-detached home. Next Gens living in Ontario and Western Canada are slightly more likely to opt for a condo (19 per cent and 21 per cent, respectively) compared to Atlantic Canada (10 per cent).
“The economy and the housing market interact strongly together. Future homebuying activity will be highly influenced by the economic conditions that exist, including the job situation and mortgage interest rates, as well as the rules associated with mortgage lending,” said Will Dunning, Chief Economist, Mortgage Professionals Canada. “Evolving personal situations will be paramount in those purchase decisions.”
Overall, when Next Gens do enter the housing market, 93 per cent will be looking for a mortgage. While Next Gens as a whole either aren’t too sure of the type of mortgage to expect (30 per cent) or are planning on a combination mortgage (30 per cent), those looking to purchase in the next year are planning for either a fixed-rate (32 per cent) or combination (33 per cent) mortgage, with a median interest rate expectation of 3%. Nearly two thirds of imminent buyers (61 per cent) expect an amortization of 25 years, while 71 per cent expect to pay off their mortgage in less than 25 years.
For a full copy of The Next Generation of Homebuyers, click here.
About Mortgage Professionals Canada
Mortgage Professionals Canada (formerly CAAMP) is Canada’s national mortgage broker channel association representing more than 11,000 members from coast to coast. We recognize that Canadians need and deserve more. We believe in competition as it produces better options and demands ever-improving service and products. We believe in choice as it benefits Canadians and delivers an environment of opportunity. We believe in professionalism as it demonstrates commitment, trust and excellence. The mortgage broker channel is a critical and valuable profession. It creates possibility, fuels the economy and provides Canadians with choice when making among the most important financial decisions of their lives.
SOURCE Mortgage Professionals Canada
For further information: Paul Taylor, President and CEO, Mortgage Professionals Canada, O: 416-644-5465 / C: 905-334-1165, ptaylor@MortgageProsCan.ca; Karolina Olechnowicz, Senior Consultant, Media Profile, O: 416-342-1822, firstname.lastname@example.org