Those who dream of acquiring a first property in Montreal or in another major Canadian city are right to be discouraged. With the explosion in prices, the time required to accumulate the down payment has never been so long. Sometimes it takes decades.
Posted at 6:30 a.m.
In Toronto, a couple whose income is in the median must put 10% aside for 30 years and 3 months to become the owner of a standard house at 1.3 million, calculates the National Bank. His children have time to become parents themselves before the signing of the mortgage, my faith!
Montreal does not play in the same league.
By saving 10% of their gross income, a household can hope to go house hunting after “only” 4 years and 3 months.
But for those who stick to this discipline, it’s still endless.
Seen from here, it is almost surreal that young people succeed in becoming homeowners in Toronto. And I’m not talking about Vancouver, where the average house costs $1.67 million. Its 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 a little. It’s insane.
But let’s go back to the Queen City where I asked a real estate broker and a mortgage broker to tell me how their clientele accesses property. Have they developed things that escape us?
Right off the bat, mortgage broker Ron Butler, founder of Butler Mortgage, says his clients often receive “really big gifts from their parents” for the down payment. “These parents can afford to offer money, because the value of their house has increased drastically. »
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, less well-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, 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.”
PHOTO PROVIDED BY RON BUTLER
Ron Butler, mortgage broker and founder of Butler Mortgage in Toronto
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 could not borrow more than $300,000 each. Together, they were able to get their hands on a $600,000 house. Another couple who “wanted to get into the market” bought with a friend since it was their only way to obtain the required financing. “They live like roommates! Is it easy? No. »
However, a visit to a lawyer is essential before embarking on such an adventure, warns Jared Gardner, because all the unpleasant scenarios you can imagine are likely to happen.
patience and sacrifice
Broker Jared Gardner is also seeing changes in buyers’ “wants and needs” list.
Now, Torontonians agree to do without the huge granite island in the center of the kitchen. They agree to buy houses that need a lot of love, telling themselves that they will renovate later, when their incomes have increased.
PHOTO ANNA KOBELAK, SUPPLIED BY JARED GARDNER
Jared Gardner, Toronto Area Real Estate Broker
Not so long ago, “everyone wanted a huge yard,” updated bathrooms and spotless floors, reports Jared Gardner. This is no longer the case. Expectations of distance from downtown and livable space have also diminished.
Everyone makes sacrifices and must arm themselves with patience to find the rare pearl. Moreover, the number of first home buyers aged 25 to 35 is 50% lower in Ontario than 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 they see with their parents what their first house looked like. I guarantee you it was not detached!
Jared Gardner, real estate broker associated with RE/MAX in the Toronto area
In the downtown towers, micro-condos are now legion. “The majority are under 500 square feet. It goes up to 370 square feet. The next step is the beds on the ceiling, ”predicts Ron Butler while lamenting that the situation in Toronto is “a disaster for young people”. If the oldest are happy to know that the value of their property has exploded, the gains are made “on the backs of future generations”, he laments.
We can’t blame them…
These older people have not forgotten the 20% interest paid in the early 1980s. We understand them. Despite the recent dizzying rise in property prices, “in terms of [de poids relatif] payments, it was worse at the time,” confirms National Bank Deputy Chief Economist Matthieu Arseneau.
Today, in Montreal, the average household that owns a standard house must devote 41% of its gross income to its mortgage. When Celine Dion had her first success, 50% went straight to the bank.
These exorbitant payments did not last. Just as the current real estate frenzy should subside. Moreover, it has already begun in Toronto. In Quebec, Desjardins expects a 12% drop in property prices in 2023 compared to the peak that will soon be reached.
Patience !