When planning to buy a home, one of the first steps of the process is to gather enough funds to reach the required minimum down payment. Although a down payment can be as little as five per cent of the property’s sale price, this can still represent a significant sum. With real estate prices having reached historic highs in recent years, an insufficient down payment can restrict the selection of properties available to buyers as the size of minimum down payments grow. Amassing a sufficient down payment without the advantage of equity gained from the sale of an existing property is the challenging scenario faced by many first-time buyers today.
A new survey1 released by Sagen™, conducted by Environics Research, with a series of questions for Royal LePage, reveals that among the surveyed provinces, the number of first-time buyers – those who purchased their first home in the last two years – who reported feeling worried about missing out on a home they really wanted because of an insufficient down payment, was lowest in Quebec. The same trend was observed among respondents in the Greater Montreal Area who reported feeling less worried compared to the other metropolitan areas surveyed: the Greater Toronto Area, Greater Vancouver and Greater Calgary.
In the province of Quebec, 57% of first-time homebuyers expressed feeling worried their down payment would not be enough to get the home they wanted (56% in 2021) prior to purchasing their first property, compared to 67% of respondents in the Greater Montreal Area (63% in 2021). Nationally, 67% of first-time homebuyers reported feeling worried, while 74%, 71% and 69% of this cohort reported feeling the same in the greater regions of Toronto, Vancouver and Calgary, respectively. However, among first-time intenders – respondents planning to purchase their first property within the next two years – the trend is reversed, with more respondents in the Greater Montreal region reporting feeling anxious, compared to the other metropolitan areas surveyed (70%).
“While home ownership is more affordable compared to other Canadian provinces, home prices in the Greater Montreal Area and within the province have risen significantly over the past three years, keeping many would-be buyers out of the market,” said Geneviève Langevin, real estate broker, Royal LePage Altitude in Montreal.
As a result of tight economic conditions, 43% of first-time homebuyers in Quebec purchased a home in a more affordable neighbourhood or region than they had originally planned (43% in the GMA). In the province of Quebec, 29% of first-time homebuyers purchased a smaller home than they had originally planned (37% in the GMA), and eight per cent say they had to seek financial assistance from family or friends (15% in the GMA). Among the metropolitan regions surveyed, the Greater Montreal Area reported the highest proportion of first-time buyers who did not receive financial assistance to purchase their property (36%).
“Buyers who purchased a home during the pandemic real estate boom bought at higher prices, but at historically low interest rates,” said Langevin. “We will have to wait for mortgage renewals to know the full effects of rising borrowing costs on the market. However, buyers are somewhat protected from default by the mortgage stress test, which requires them to qualify at a rate higher than the bank’s negotiated rate. This is a very good thing, as buyers can avoid having to sell as a result of not being able to repay their loan.”
Read the full national 2023 Canadian First-time Homebuyer Survey here.
1The study was completed by Environics Research on behalf of Sagen MI Canada Inc. A total of 2,223 interviews were conducted with Canadians aged 25-45 who had either purchased their first home within the prior two years or plan to in the next two years. Online interviewing was completed between February 22 and March 27, 2023. Quotas were set to oversample in urban regions with weighting to bring them into overall national proportions.
