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First-Time Homebuyers Continue to Believe Owning a Home is a Wise Financial Decision and Can Adapt to Today's Challenging Housing Market

May 8, 2017

TORONTO, May 8, 2017 /CNW/ - According to Genworth Canada's new 2017 First-Time Homeownership Study, almost half of first-time buyers (49%) believe owning a home is a wise financial decision. Top reasons homebuyers were motivated to purchase include: 1) believe owning is a wiser financial decision (49%); 2) want to control the home they live in (46%); and 3) saved enough for a down payment (45%). A further three in ten (29%) said they disliked renting a home. Nearly six out of ten or 57% of first-time homebuyers indicated that they would have a more difficult time buying with the stricter mortgage qualifying rules recently introduced.

The survey shows that the first-time homebuyer is someone who is employed full-time (84%), working in private business (48%) has a university or post graduate degree (61%), and earning a combined household income of over $100,000 (33%).

"From the perspective of a mortgage insurer, these first-time homebuyers possess a positive profile which includes full-time jobs and incomes to support their monthly mortgage payments. They are financially responsible and looking for the benefits associated with long-term homeownership," commented Mr. Levings, President and CEO, Genworth Canada.

The study also found that 48% of homeowners felt they were in "good financial shape" and have a general notion of what they wanted to achieve with their finances. The results of the study in 2017 compared to 2015, showed a slight decline in the perception that owning a home was a wise financial decision (49% down from 53%) likely due to current house prices being much higher than in 2015. In addition, first-time homebuyers were less confident they could afford a home (39% down from 44%).

When presented with the stricter mortgage qualifying rules for people buying homes with less than 20% down payments, 57% of current homeowners responded that it would be more difficult to buy a home today including 32% who said it would be much more difficult. Only 18% of current homeowners said they would not be able to buy a home. 

However, these same homeowners indicated they would adapt by carefully planning and managing their debt burden through a number of strategies. These strategies may include the decision to delay the purchase of a home (53%), cut non-essential spending  (23%), ask for a down payment gift from friends/family (23%), or seek a down payment loan from a third party lender (16%). 

Clearly, there are regional variations across Canada with respect to affordability that lead to some significant differences in home prices. The geographic areas with the highest level of difficulty to purchase a home are Toronto (64%), Vancouver (63%) and Calgary (62%).

First-Time Buyers: Key Regional Variances

Market

Median Price
paid

Median Down
Payment

Down
payment
<20%

Household
Income >100K

Condo
Purchase

Vancouver

$410K

$75K

47%

36%

47%

Calgary

$385K

$50K

59%

46%

21%

Toronto

$500K

$90K

47%

45%

35%

Montreal

$300K

$40K

63%

37%

39%

Atlantic

$191

$15K

82%

26%

8%

 

Source: The 2017 Genworth Canada – First-Time Homeownership Study

**The median home prices reported reflects the prices paid by first-time homebuyers, which may differ from the prices paid by homebuyers of all types in each city or region.

 

The survey notes higher median down payments in Toronto and Vancouver, which appear to be driven by higher savings and larger gifts or loans from family members. While the median down payment nationally is 12%, the amount ranges from 10% in Atlantic Canada to 20% for both Toronto and Vancouver. Overall, 63% of buyers surveyed made a down payment of less than 20%.

Between 2015 and 2017, the study indicates that the proportion of the Canadian population that are first–time homebuyers has declined from 7.3% to 5.8% representing a difference of 1.5% or a 21% decline. Remarkably, the overall profile, behaviors and motivations of first-time homeowners have remained largely consistent. Areas of significant change however include:

  • Financial confidence of affording a home (39% down from 44%).

  • Longer times to save for down payments (23% up from 20% savings for 6+ years), and more report feeling worried they might miss the perfect house without enough saved on a down payment (60% up from 54%).

  • Fewer pre-approved applications prior to shopping for a home (54% down from 62%) with more waiting to find a home they are serious about and checking if they can afford to buy it. Once buyers pass that hurdle, they start negotiating the price of the home (30% up from 21%).
     
  • Few saving in non-registered accounts (65% down from 69%), with more withdrawing savings from a Tax Free Savings Account (TFSA) (29% up from 24%), with the use of RRSPs remaining unchanged.
     
  • Thinking ahead to when they have to renew their mortgages, first-time buyers are less likely to cite interest rates as a reason to stay (27% vs 34%) or switch lenders (36% vs 59%).

 

"This research continues to show that despite differences by region, first-time buyers are doing their homework and have responded to market conditions well, entering homeownership on a solid financial foundation," said Mr. Levings.

From January 28 to February 9, 2017, interviews were conducted with 1,803 Canadians, aged 25-40 who purchased their first home within the previous two years. The results were analyzed by Environics Research Group to gain deeper insights into the Canadian preparedness and financial fitness of buyers. The 2017 findings were compared to a similar study in 2015 to identify new attitudes and trends.

Click here to view the presentation

Genworth Canada 2017 Homeownership Study (CNW Group/Genworth Canada)

About Genworth MI Canada Inc.

Genworth MI Canada Inc. (TSX: MIC) through its subsidiary, Genworth Financial Mortgage Insurance Company Canada (Genworth Canada), is the largest private residential mortgage insurer in Canada. The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers. Genworth Canada differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For almost two decades, Genworth Canada has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system. As at March 31, 2017, Genworth Canada, had $6.7 billion total assets and $3.8 billion shareholders' equity. Find out more at www.genworth.ca.

SOURCE Genworth Canada

Susan Carter, Vice President, Marketing & Communications, Genworth Canada, 905-287-5520
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