According to a new survey by the Canadian Association of Accredited Mortgage Professionals (CAAMP), it seems that those responsible for keeping the housing market alive right now are actually the first-time homebuyers.
Even with the housing market prices currently at an all-time high, those purchasing a home for the first time are making up 45 per cent of the 620,000 homes sold over the past two-plus years in Canada.
The Toronto Real Estate Board’s director of market analysis, Jason Mercer, doesn’t disagree, but he believes there are a number of factors to consider as to why the housing market is still so strong.
“I wouldn’t necessarily disagree that it’s first-time homebuyers who are driving the market,” says Mercer of Toronto. “But there is also an added supply of housing now with new condominiums and project completions throughout the city.”
Mercer explains that, if we look at things like job creation and consider where unemployment rates have been trending in the last few months, we would see that Toronto’s local economy has been one of the best performing local markets.
He also credits diversity within the city as a factor in determining why we are seeing so many new homeowners.
“Toronto has one of Canada’s most diverse local economies, so there are a lot of different employment opportunities,” says Mercer. “It’s a virtuous circle in a sense that those employment opportunities attract a diversity of newcomers to Canada, and they choose to move into the Greater Toronto Area,” he adds.
The latest CAAMP consumer survey report released revealed that, even though 18 per cent of down payments are still being loaned to buyers (usually from parents), 53 per cent are using money that they themselves or their co-buyers have saved.
“Everyone questions where the money is coming from, and a lot of it is simply borrowed money, but nobody collects that data because of privacy laws,” says Sherry Cooper, chief economist of Dominion Lending Centres. She believes the money is coming from parents. “It’s baby boomer parents helping out their kids.”
However, Cooper doesn’t agree that it’s first-time homebuyers exclusively who are driving local housing markets, especially with regard to the biggest increases in Toronto and Vancouver.
“Employment might be growing in Toronto, but it is also dampening in places like Alberta, because of the oil patch, so places like Calgary and Edmonton have been negatively affected.” She stresses that the survey was based on all of Canada and to keep in mind that those markets are much cheaper than Toronto and Vancouver.