Affording a Home Requires Compromises - but Families Are Okay with ThatWritten By: Jim Adair
Wednesday, January 16, 2019
In a perfect world, the overwhelming majority of young urban Canadian families would purchase a single-family home in move-in condition with a nice yard and a garage. In the real world, affordability issues require families to make compromises when they purchase real estate -but theyrsquo;re okay with that.
A survey of urban families where the adults are ages 20 to 45, conducted in Canadarsquo;s four largest cities, found that although 83 per cent of young families still aspire to own that singe-family dream home, only 56 of those surveyed actually purchased one. The others bought attached homes, a duplex/triplex/multiplex unit or a condominium. Despite making compromises to get into home ownership, 93 per cent of families are satisfied with their purchase and 78 per cent believe their investment will outperform or match their financial investments during the next five years.
The survey was conducted by market research firm Mustel Group on behalf of Sothebys International Realty Canada.
ldquo;Young families are much more influential in Canadarsquo;s metropolitan real estate markets than many realize. With 9.1 million Canadian millennials now entering the partnership, marriage and parenting stages of the family life cycle, the ranks of these modern families are swelling,rdquo; says Brad Henderson, president and CEO of Sothebyrsquo;s International Realty Canada. ldquo;Our research dispels several urban myths about the housing preferences of this group. It suggests that the wave of demand for single-family home ownership will continue to rise in spite of mounting affordability challenges. Moreover, it highlights the fact that cities will continue to face significant pressure to overcome these challenges with solutions that go beyond the addition of higher-density housing.rdquo;
The survey found that 43 per cent of families that have already purchased real estate have abandoned the idea of buying a single-detached home because of affordability issues, while 39 per cent still plan on purchasing one in the future.
RBCrsquo;s December 2018 affordability report says that rising interest rates in 2019 will ldquo;keep upward pressure on ownership costs. Softening prices in key markets and rising household income increases will provide some offset, however.rdquo;
RBC says the mortgage stress test, which requires borrowers to qualify at a higher rate than their offered rate, has added almost 36,000 to the qualifying income needed to buy an averaged priced home in Vancouver. In Toronto it has added 27,000.
The impact of the stress test has been felt across the country, but outside of the major cities, RBC says owning a home remains affordable in most other markets.
The Sothebys survey asked what modern buyers are looking for when buying a home. Value per square foot was the No. 1 answer, followed by the home being move-in ready and requiring little renovation, and having the desired number of bedrooms. Twenty-six per cent of respondents were looking for a newer home five years or less, while having an open-concept kitchen/dining/family room layout was important for 14 percent of those surveyed.
In Vancouver, having an existing or potential rental suite in the home was important to 11 per cent of respondents, but that was less important in Toronto, Montreal and Calgary. Buying a home with smart home technology such as an electric car charger was cited by only one per cent of respondents.
Just 18 per cent of families said they didnrsquo;t have to make any comprises when they purchased their home. The compromise cited most often was going over budget. An equal number said the home required more renovation work than they would have preferred, and the property was older than desired. Some buyers got less square footage and yard space than hoped for, and 17 per cent decided on a location that was farther from downtown than they wanted.
But 95 per cent of Toronto families and 94 per cent of Montreal families said they are either ldquo;veryrdquo; or ldquo;somewhatrdquo; satisfied with their purchase. Ninety-one per cent of families in Calgary report some satisfaction and 90 per cent of Vancouver families are satisfied.
The survey was conducted from August 9 to September 9. Despite flattening real estate prices, most buyers are confident with the investment value of their purchase. Seventy-eight per cent of respondents say they think their home will outperform or match the performance of their financial investments in the next five years. Forty-eight per cent say real estate will outperform other financial investments.
One-third of the properties purchased by respondents were over 2,000 sq. ft., with 24 per cent between 1,000 and 1,499 sq. ft; 22 per cent between 1,500 and 1,999 sq. ft.; and 21 per cent with less than 1,000 sq. ft. Three-bedroom, two-bathroom homes were the most commonly purchased home. Eighty-three per cent had two or more bathrooms.
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