Those who dream of purchasing their first property in Montreal or another major city in Canada are right to be discouraged. With prices exploding, the time it takes to accumulate a down payment has never been longer. Sometimes it takes decades.
In Toronto, a couple whose income is in the median must set aside 10% for 30 years and 3 months to become the owner of a standard house at 1.3 million, calculates the National Bank. Your children have time to be parents themselves before the mortgage is signed, my faith!
Montreal doesn’t play in the same league.
By saving 10% of their gross income, a household can look forward to finding a home after “just” 4 years and 3 months.
But for those who stick to this discipline, it is still endless.
Viewed from here, it’s almost surreal that young people manage to become homeowners in Toronto. And I’m not talking about Vancouver, where the average home costs $1.67 million. Your purchase assumes (with the minimum down payment) mortgage payments of $7,453 per month or 101.5% of the median income of $88,000 and under. It’s crazy.
But let’s go back to Queen City, where I asked a real estate broker and a mortgage broker to tell me how their clientele accessed property. Have they developed things that escape us?
Early on, mortgage broker Ron Butler, founder of Butler Mortgage, says his clients often receive “really big gifts from their parents” for a down payment. “These parents can afford to offer money because the value of their home has increased dramatically. »
Last fall, the CIBC revealed that 30% of first-time buyers use a donation and that it amounts to an average of $82,000 in the country.
The second, lesser-known phenomenon is multi-name mortgages, says Ron Butler. “To get a bigger loan, couples add names to the contract. They add their parents, grandparents, friends, brothers, and sisters. In Ontario, the number of mortgages with more than two names is increasing significantly. It went from 6% in 2019 to 13% in 2021.”
Real estate broker Jared Gardner, associated with RE/MAX, confirms that he sees this “a lot.” He also found a house for two friends who couldn’t borrow more than $300,000 each. Together, they were able to own a $600,000 house. Another couple who “wanted to get into the market” bought with a friend as it was their only way to obtain the required financing. “They live like roommates! It is easy? Nope. “
However, a visit to an attorney is essential before embarking on such an adventure, warns Jared Gardner, because every unpleasant scenario you can imagine is likely to play out.
patience and sacrifice
Broker Jared Gardner is also seeing changes in buyers’ “wants and needs” lists.
Now, Torontonians agree to do without the massive granite island in the center of the kitchen. They agree to buy houses that need a lot of love, telling each other that they will renovate them later when their income has increased.
Not long ago, “everyone wanted a huge patio,” updated bathrooms, and pristine floors, reports Jared Gardner. This is not the case. Expectations for distance from downtown and living space have also decreased.
Everyone makes sacrifices and must be patient to find the rare pearl. Additionally, the number of first-time homebuyers between the ages of 25 and 35 is 50% lower in Ontario than it was 20 years ago, reports Ron Butler.
The hardest part for first-time buyers is realizing that they won’t be able to buy a single-family home. Because they want the kind of home they grew up in. I suggest that you see with your parents what your first house was like. I guarantee it didn’t come off!
Jared Gardner, Real Estate Broker associated with RE/MAX in the Toronto area
In the downtown towers, micro condos are now legion. “Most are under 500 square feet. It goes up to 370 square feet. The next step is the beds on the roof”, predicts Ron Butler while he laments that the situation in Toronto is “a disaster for young people”. If seniors are happy to learn their property values have skyrocketed, the profits are made “on the backs of future generations,” he laments.
We can’t blame them…
These seniors haven’t forgotten the 20% interest paid in the early 1980s. We get it. Despite the recent skyrocketing property prices, “in terms of [de Zoids relatif] payments, it was worse at the time,” confirms Matthieu Arseneau, deputy chief economist at the National Bank.
Today in Montreal, the average household that owns a standard house must spend 41% of their gross income on their mortgage. When Celine Dion had her first hit of hers, 50% went straight to the bank.
These exorbitant payments did not last. Just as the current real estate frenzy should subside. Also, it has already started in Toronto. In Quebec, Desjardins expects a 12% drop in property prices in 2023 compared to the peak that will be reached soon.
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