In July 2018, the Mortgage Professionals Canada released their Report on Housing and Mortgage Market in Canada” authored by their Chief Economist, Mr. Will Dunning.
The following is a small but important indication of what is in the report.
1. Adjusting the Purchase Price:
The report points out that 18% of buyers who could actually afford the home purchase of their choice would fail the stress test. It’s estimated these buyers would have to adjust their purchase by an average of $28, 750. They would also need to increase the amount of down payment. This affects about 120,000 buyers per year.
2. Number of Resale’s:
To date this year, national resale home activity is down 12.5% compared to last year and 16.5% versus 2016. For the Niagara Region, the overall number of sales in resale homes is down by an average of 21% year-to-date to June 30, 2018.
3. Average House Prices:
Since 1997 (2 decades) the national average price of resale homes has increased by 6.2% per year from $155,000 in 1997 to $510,000 in 2017. To date for 2018, the average price of homes in Niagara varies from a low of $334,000 in Welland to a high of $755,000 in Niagara-on-the-Lake. The overall average lies at $471,000. The increase in average price to the end of June is up 1.7% compared to last year. Yet this varies: some cities are indicating an increase, others a decrease from last year.
4. The Home Ownership Rate:
In Canada the home ownership rate was at 67.8% in 2016 according to Census Canada. This is down from 69% in 2011. The report attributes this to first-time buyers taking longer to buy. Yet with the additional challenge of the stress test, Mr. Dunning expects that “will fall further during the 2016 to 2021 Census period, with the burden being borne, once again, disproportionately by young adults.”
5. Sources of Down Between 2015 to 2018:
As the main source, 85% of down payments come from personal savings.
Another 39% derives from gifts from parents and other family members.
25% is sourced from loans from parents and other family members.
Loans for a down payment sit at 43%.
From an employer, loans are at 8%.
Withdrawal from RRSPs through the Home Buyers Plan: 38%.
And finally down payments from other sources stands at 6%.
The total down payments are made up of a combination of any number of the sources mentioned above. The most prevalent source, personal savings accounts for about 50% of the total down payment for first time buyers.
During the 1990’s the average down payment for first-time purchases was about 22%. Between 2014 and 2017, the average has been 26%.