It’s no secret that over the course of the last year, housing prices across Canada have soared to new heights. In fact, the average housing price nationally has increased by 7.0% from February 2020 to February 2021. In a market where being a first-time home buyer was already costly, this increase in price only lends itself to creating more of a barrier for first time buyers.
Despite this large increase in housing prices across Canada, National home sales rose by 6.6% on a month-over-month basis in February. As well, Google Canada reports that more and more people are actively searching for real estate using the search engine. Marshall Self, director of finance industry for Google Canada states, “What we’re seeing is more and more Canadians are moving outside of the city and looking for different living spaces, larger living spaces overall.”
The search engine reports show that four (4) cities in British Columbia are included in the top ten increase in real estate search results across Canada. Those cities are Surrey, Port Moody, Abbotsford, and Langley. Interestingly enough, three of the four cities listed are considerably smaller than larger metropolitan areas with each of them having a population below 150,000 people – a far cry from the over 600,000 inhabitants of the city of Vancouver; proving that many prospective homebuyers are considering moving to less-populated areas in hopes of buying larger properties.
The crux of more rural areas being in high demand is creating an impact on housing prices. Typically, in more remote or rural areas, housing prices are considerably less when compared to more densely populated, urban areas. However, the influx of people looking to relocate from urban to rural destinations has spiked housing prices in these less expensive markets, pushing first time buyers further away from reaching their home ownership goals.
First Time Home Buyers are Being Affected by the Pandemic
When looking to buy a home for the first time, many people save up money for years and years to afford the down payment. The average age of a first-time home buyer in Canada is 36 years old; this is largely due to many needing to save for anywhere from five to ten years in order to afford a reasonable down payment. However, the current pandemic has dramatically shifted these timelines for many.
For the majority of 2020 and so far through 2021, Canada has been battling through the COVID-19 pandemic. This has led to many people being left without work, while a large portion of citizens are working from home. Individuals who have been put out of work throughout this pandemic have been forced to be prudent when it comes to finances; meaning many who were in line to buy a home for the first time, have had to modify their plans, instead taking a seat on the side-lines.
While low interest rates have been an incentive in the home-buying games, the lack of consistent income for some first time home buyers has overthrown the benefit of low interest rates. Statistically, there are more first-time home buyers in British Columbia, however, after digging a little deeper and looking at the whole picture, it comes to light that first time buyers make up the smallest portion of total buyers in the BC market.
First time buyers made up 9.65% of transactions in January 2021 which is a 0.63% decrease when compared to January 2020. This is further supported by the reality that while total transactions in BC increased by 24.2% from January 2020 to January 2021, first time buyer transactions only increased by 17.1%. Meaning, more homes are being bought, but they are not being bought by first time buyers.
To make matters worse for hopeful first-time buyers in British Columbia, proposed increases to the “stress test” by the federal banking regulator may push out potential buyers who are currently on the cusp of qualifying for a mortgage. These changes are an effort to cool heated markets like Metro Vancouver, but according to Keith Roy with RE/MAX Select in Vancouver, this doesn’t help young buyers: “If you’re a first-time buyer and you’re just barely getting going in your career, you’re going to make more in the future, and you stretch to buy that condo that you want to buy, you’re going to have less purchasing power now,” he said in a CityNews report.
So, if first time buyers aren’t driving sales, then who or what is? It is safe to assume that based on statistics, the housing market is being driven by existing homeowners scooping up investment homes, or buying a new property and turning their current home into an investment property. If this trend continues, first time buyers will be pushed further and further out of the market, unless the housing bubble bursts and prices dramatically fall in the coming years…which is a whole other story on its own!
The best advice for first-time home buyers within BC and country-wide: align yourself with a trusted REALTOR® to help you navigate this new red-hot real estate normal. Deals can be found, you just have to know where to look!