Better time to buy
Buying as a single person makes sense if you can afford it. Holding off until you’ve found a partner could mean losing out on equity gains.
“Getting into the market at an appropriate time, based on what you can afford, is a good thing because the longer you wait to build equity, the longer it will take,” says RE/MAX president Christopher Alexander.
And it’s a better time to buy a first home than it was a year ago because, depending on the property, it’s more of a buyer’s market, so there’s less competition and more wiggle room, he says.
First-time buyers are driven by a fear of missing out on all the equity gains, particularly in urban markets. Today, they are still out there, shopping around, but they’re more cautious because of rising rates. While some markets are leveling off, others are still hot, Alexander says. But overall, it’s healthier than the frenzied buying of recent years. Any uncertainty will ease once consumers aren’t feeling at risk of interest rates climbing again. However, the forecasts aren’t helping. Some expect the next rate hike on Sept. 7 to be the last for some time, while others expect the hikes to continue into 2023.
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You might have to move
Young singles have more freedom and flexibility about where to live, which is an advantage. According to a new Royal LePage survey, the millennial cohort is willing to move away from their hometown or city in order to buy a home. The survey results showed that more than four million young Canadians, or 51%, are planning to purchase property some time before 2027. And 60% believe they will own a home at some point. Of those, 52% were willing to relocate to do so.
But don’t move too far away from work. A Canada Mortgage Housing Corporation (CMHC) study from 2018 showed that car commuter costs can range from $200 to $399 a month for Toronto commuters living in Mississauga, Vaughan or Richmond Hill. The costs would only be greater now with the higher price of gas. Perhaps that’s why 40% of millennials would change employers in order to work remotely, rather than commute, according to the Royal LePage survey.
Expect a lifestyle adjustment
Information technology support analyst Jared Chow had been sharing a rental apartment in downtown Vancouver for about four years when he purchased a presale (pre-construction) condo unit that was completed in January 2021. Chow had been looking for about three months, and his requirement was a one bedroom with office space that was pet friendly.
His unit has already increased in value by $100,000 according to his property assessment, which helps offset a mortgage rate increase of 2%.
His mortgage payment is “quite a bit more” than his old rent, but he made sure he could afford it, he says. He plans to upsize into a townhome next.
“I knew that having to pay mortgage payments would require some adjusting to my lifestyle, but I was ready for that change.”
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Buy within your means—or your parents’ means.
Like a lot of millennials, Chow’s family provided the down payment for his purchase.
“The bank of mom and dad has been prevalent, especially in the Greater Toronto Area and Vancouver,” says Alexander.
Parents often take out home equity lines of credit to help their kids.
“That’s been a pretty big trend as well,” says Alexander. “A lot of boomers bought homes 25 years ago and prices have almost quadrupled in that time. If your house you bought 25 years ago for $200,000 is now worth $1.2 million, you take out $100,000 to help.”
And if you aren’t lucky enough to have parents who can help, Alexander has seen friends get together to co-purchase. The key is to be sure not to over-leverage yourself, he advises. Calculate the hidden costs, including future rate hikes, taxes, insurance, and repairs. Ask yourself if you can truly afford the mortgage payments, how long you plan on living in the home, and if you can handle up and down cycles.
“Buy within your means, that’s really important,” he says.
And take your time, adds Chow.
“Don’t rush [into] a place you’re settling for, but wait for a place you really like.”
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