Young individuals remain hopeful about homeownership despite challenging housing market conditions. A survey reveals that nearly 45% of those aged 18-34 plan to buy a home within five years. Although rising prices and qualifying for loans pose obstacles, strategies like utilizing tax tools and government initiatives can significantly aid first-time buyers in saving for down payments. With determination and smart financial planning, young buyers can work towards realizing their homeownership aspirations.
Reviving the Dream of Homeownership for Young Buyers
While the current housing market may seem daunting, the aspiration of owning a home is still very much alive among young individuals. Despite soaring prices, a significant portion of millennials and Gen Z are determined to make their homeownership dreams a reality.
Young Buyers Are Holding On
According to a survey conducted by the Quebec Professional Association of Real Estate Brokers (APCIQ), the Quebec Housing Corporation (SHQ), and the FTQ Solidarity Real Estate Fund, nearly 45% of individuals aged 18-34 are contemplating purchasing a home within the next five years. This figure starkly contrasts with just 24% of those aged 35-54 and a mere 9% of those over 55, showcasing the resilience and ambition of younger buyers.
Although recent interest rate reductions have provided some relief, many first-time buyers still face challenges in qualifying for loans that keep pace with escalating property prices. Steve, a potential buyer who wishes to remain anonymous, shared his frustrations: “Right now, there’s nothing affordable. Qualifying for a good amount for a nice house is very hard. I’ve postponed my project to next year,” he stated, emphasizing the struggles faced by couples earning a combined income of $120,000.
Steve and his partner are not looking for lower-priced homes that require extensive renovations, as he explained, “I work in construction, and when I get home on Friday, I don’t want to think about working; I want to rest.” Their ideal pre-approval amount is between $300,000 and $400,000, but they recognize the importance of saving diligently to reach that goal.
Strategies for Saving and Government Support
Steve and his partner’s strategy of saving could yield positive results. Fortunately, various government initiatives can significantly enhance the down payment for first-time homebuyers. There are three essential tax tools that, when fully utilized, can contribute nearly $100,000 towards a down payment.
The first tool is the TFSA-APP, which allows individuals to contribute up to $8,000 annually, totaling a maximum of $40,000. Ariel Gervais, a mortgage broker at Multi-Prêts Hypothèques, highlights that “this tool combines the benefits of the RRSP and the TFSA,” offering tax deductions on contributions and tax-free withdrawals.
Next is the Home Buyers’ Plan (HBP), which permits individuals to withdraw funds from their RRSP to purchase or construct a home without tax implications. Nathalie Hotte, a partner at Raymond Chabot Grant Thornton, notes that couples can withdraw up to $120,000, provided they’ve managed to save this amount.
Lastly, the non-refundable tax credit for first-time buyers can reach up to $1,250 for eligible applicants. In Quebec, this credit is 14%, translating to a potential $1,400 for the down payment. “When we combine the two, it’s often more than $2,600 that we can save, and this tool is often overlooked by buyers,” adds Hotte.
With determination and the right financial strategies, young buyers can navigate the challenges of the housing market and work toward fulfilling their dream of homeownership.