Buying first home a challenge for many in Prairies, survey shows

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This article was published 23/06/2023 (1194 days ago), so information in it may no longer be current.

Evan Midford had gotten used to checking boxes next to life milestones. University degree — check. Starting a career — check.

He’s stopped, and stalled, at home ownership.

“I just sort of thought that owning a home would be something (where) you got a job, and then you got to own a house,” Midford, 29, said. “That’s what my parents did… It turns out, that’s increasingly difficult and financially unattainable.”

A majority of potential first-time homeowners in the Prairies — 59 per cent — are worried they won’t have a sufficient down payment saved for a house they really want, a new Royal LePage and Sagen survey found.

The number jumps to 77 per cent when surveying recent first-time home buyers in Manitoba and Saskatchewan on their initial down payment fears. Many purchasers got creative to enter the housing market, Royal LePage reported Thursday.

For Midford, the down payment isn’t necessarily prohibitive — it’s the interest rate hikes and more expensive mortgages.

He’d looked at homes in the West End last year, hoping for a cheaper deal, but has since halted his search while interest rates have climbed.

The Bank of Canada raised its key interest rate 4.5 per cent, to 4.75 per cent, between March of 2022 and this June. It’s hard to get a mortgage rate under five per cent now, one Royal LePage employee said.

In January of 2022, the Bank of Canada’s policy rate was 0.25 per cent.

Meantime, the average detached home price in Winnipeg sat at $407,982 in May, up from $327,452 in May of 2020. Last month’s average price is a decrease from May 2022’s $454,832.

“For a single person, owning a home is possible but it’s just incredibly difficult,” Midford said. “Thinking about it too much is, frankly, demoralizing.”

He’s renting now but doesn’t expect to save much money.

Sarah Vandale, 25, searched for a house in Transcona, North Kildonan, East Kildonan and St. Boniface — her neighbourhoods of choice — late last summer.

“There’s tons of new development and new townhouses and condos… going up in the area, but they’re all super expensive,” she said. “Everything in my price range was older and definitely needed a lot of work done.”

She turned her sights to Osborne Village and abandoned her plan to buy a detached home — condos were cheaper.

Vandale is among 30 per cent of recent first-time home buyers in Manitoba and Saskatchewan to choose a different area of town for affordability.

Thirty-nine per cent bought a smaller home than they’d originally envisioned, Royal LePage’s report found.

“In theory, I could’ve afforded to get a house… but then I’d be living more paycheque to paycheque,” Vandale said. “I wouldn’t have any disposable income.”

She’s happy with her decision, she added.

A number of factors, including house prices and interest rate hikes, have made home ownership more difficult for first-time buyers, said Daniella Payne, a real estate agent with Royal LePage. A higher cost of living contributes, she added.

Manitoba’s general inflation rate increased 5.5 per cent, year-over-year, last April. It follows April 2022, when Manitoba’s inflation rate jumped 7.5 per cent year-over-year.

Payne has noticed, anecdotally, an increase in first-time buyers using financial support from their parents.

“Parents are coming into the process with their children thinking that it’s going to be like it was back in the day, and now they’re realizing that it’s a lot harder process for first-time home buyers,” Payne said. “I think parents have always assisted, but right now, I would say people are getting a lot more assistance.”

Thirty-five per cent of Manitoba and Saskatchewan respondents to Royal LePage and Sagen’s survey reported getting financial assistance from relatives in a lump sum; 19 per cent said they’re receiving financial assistance with monthly mortgage payments.

Of those to get monetary aid, 42 per cent said it was gifted, while 36 per cent called it a loan.

The people most affected by interest rate hikes are likely those who were pre-approved for mortgages early last year and held off on buying a house, said Rena Prefontaine, president of the Winnipeg Regional Real Estate Board.

“I think it feels worse now because, during COVID, interest rates got so low,” she said.

There are affordable homes in Manitoba for new buyers — the number of homes on the market is increasing — but consumers might “have to get more creative” and modify their expectations, Prefontaine said.

She highlighted that Winnipeg is still one of the most affordable cities to buy a home in, and pandemic aside, the market is generally stable.

“First-time homebuyers come in a variety of different looks,” said Clarence Braun, a Manitoba realtor. “I’ve seen first-time homebuyers spending $800,000, and I’ve seen first time homebuyers spending $250,000.”

He expects interest rates will slowly decline over the next year, though not to the level they did during the pandemic.

Home sales in Manitoba were nine per cent below the five-year average last May, data from the Winnipeg Regional Real Estate Board show.

Royal LePage and Sagen’s survey occurred online between Feb. 22 and March 27 with 2,223 Canadians age 25 through 45. Respondents had bought their homes within the past two years or planned to do so in the next two. Since the survey was not conducted with a random sample of Canadians, no margin of error can be ascribed to the results.

gabrielle.piche@winnipegfreepress.com