Recent changes in the housing market present exciting opportunities for homebuyers. As a realtor, your role is crucial in guiding clients through these updates, helping them build effective plans to achieve their homeownership goals by having them reach out to a mortgage broker to see what they are able to afford.

Knowing these new rules and guidelines will help with strategy and future goals of climbing the “real estate ladder.”

Expanded amortizations for first-time homebuyers

Starting December 15, first-time homebuyers will have access to 30-year amortizations. This change can benefit your clients in two significant ways:

1. Lower income requirement. By extending the amortization period, the income required to qualify for a home purchase decreases. This means more clients can meet the necessary criteria.

2. Reduced monthly payments. Clients will experience a decrease in their monthly payments, making homeownership more financially manageable. For instance, on a $600,000 purchase, the monthly payment could drop by approximately $250, providing greater flexibility in budgeting.

Increased insured mortgage cap to $1.5 million

For clients with high incomes but difficulties saving for a down payment, the increase in the insured mortgage cap to $1.5 million can accelerate their path to homeownership. Previously, purchasing a $1.4 million home required a down payment of $280,000. Now, as of December, clients can potentially purchase the same property with a down payment of about $115,000 — a savings of $165,000.00 in upfront requirements.

This change is also advantageous for “right-sizers” looking to downsize. It allows them to allocate more funds from the sale of their larger home toward retirement, as they can put less down on a new, smaller property. However, clients should keep in mind that closing costs, typically around 3.0 per cent of the purchase price, need to be accounted for in each scenario.

For a $600,000 purchase price, anticipate that clients will need an annual income of approximately $150,000 to meet today’s stress-test requirements.

Switching lenders at renewal: A business opportunity

While you may not initially think about how switching lenders can benefit your business, it’s essential to understand that mortgages encompass more than just interest rates. The Canadian Mortgage Charter now allows insured mortgage holders to switch lenders at renewal without undergoing a stress test. This change opens up opportunities for borrowers to shop around for better rates and terms, potentially saving them thousands of dollars.

Encourage your clients to consider lenders that don’t adhere to posted rates. This strategy can significantly reduce Interest Rate Differential (IRD) penalties.

Case in point

For example, let’s compare a $1 million mortgage with three years left on a five-year term at a 5.0 per cent interest rate: 

By choosing a monoline lender (provided qualifications are met), your client could save $25,000 in IRD penalties, allowing them to manage financial changes better and seize new opportunities.

Tax-efficient savings strategies

As well, two important tax-efficient savings methods have emerged that can empower your clients on their journey to homeownership:

1. RRSP withdrawal limit increase. The amount that can be withdrawn from an RRSP has increased from $35,000 to $60,000 per borrower. This change provides additional funds for clients to put toward their down payments.

2. First-time home saver account. Introduced in 2023, this account allows clients to save $8,000 per year in contribution room, which reduces their taxable income. Unlike RRSP withdrawals, funds from this account do not need to be repaid and any gains earned within it are tax-free. This account, however, has a sunset clause in 2028, making it vital for clients to act quickly to maximize its benefits.

These recent changes create valuable opportunities for your clients. By understanding the implications of expanded amortizations, increased mortgage caps, flexible lender options and tax-efficient savings strategies, you can help them make informed decisions on their path to homeownership.

On Monday, the federal government announced changes to mortgage rules to help more qualified buyers access mortgages and become homeowners.

The changes, taking effect this year on December 15, include allowing 30-year amortizations for first-time buyers and for newly constructed homes, along with a higher limit on insured mortgages ($1 million to $1.5 million) to reflect current housing prices. As well, homeowners will have the freedom to switch mortgage lenders at renewal without having to take a new stress test.

“We are now making the boldest mortgage reforms in decades to unlock homeownership for younger Canadians,” says The Honourable Chrystia Freeland, deputy prime minister and minister of finance, in a statement. 

“Everyone deserves a safe and affordable place to call home, and these mortgage measures will go a long way in helping Canadians looking to buy their first home,” The Honourable Sean Fraser, minister of housing, infrastructure and communities, adds.

Support from the country’s national industry voice

The Canadian Real Estate Association (CREA) says it welcomes the announced reforms, which represent a significant step towards improving access to homeownership and making housing more attainable, something realtors have long advocated for and continue to stand behind.

“This is good news for buyers, particularly first-time buyers and those in more expensive markets such as Toronto and the Greater Toronto Area (GTA), as well as Vancouver and surrounding areas,” says Janice Myers, CREA CEO.

Broad support across the industry

The mortgage reforms will drive more housing construction and supply and reflect recommendations that the Canadian Home Builders’ Association (CHBA) has been calling for. The organization says it’s just what the market needs to help correct the falling trajectory of housing starts and build more homes.

Likewise, the Toronto Regional Real Estate Board (TRREB) says it strongly supports these measures, which will help reduce the monthly cost of mortgage payments and make homeownership a reality for more people across the country, as well as stimulate new housing construction and help address the ongoing housing shortage in our communities.

Karen Yolevski, COO of Royal LePage Real Estate Services Ltd., agrees. In a company blog post, she notes, “For many homebuyer hopefuls, the monthly mortgage payment is often the deciding factor between a property that fits in their budget and one that doesn’t. An extra few years to spread out those payments will help many purchasers make the transition from renter to homeowner. Those shopping in Canada’s most expensive markets, where home prices over $1 million are the norm, will also find it a little easier to get into the market.”

Myers shares similar sentiments: “In a recent budget submission, we had advocated for extending 30-year amortization terms to all first-time buyers. We’re pleased our suggestion was adopted to provide more opportunities for homeownership.”

Yolevski expects the implementation of the new rules to likely follow another interest rate cut or two this year. “Lower borrowing costs, combined with these extended mortgage powers, may stir first-time buyer demand in the months ahead, setting the stage for a robust spring market in 2025.”

TRREB: Another call to action

TRREB notes that increasing the insured mortgage price cap in today’s market will allow more people to qualify for an insured mortgage and provide crucial homebuyer support in high-cost areas like the GTA.

It also supports the government’s earlier decision to allow insured mortgage holders to switch lenders at renewal without undergoing a new mortgage stress test and would like this extended to uninsured mortgages, typically those where the homeowner made a larger down payment.

“We have long advocated for these measures, particularly for homeowners to be able to switch lenders at mortgage renewal without a stress test,” notes TRREB CEO, John DiMichele. “Increased competition among lenders is good for homeowners and homeownership, so we reiterate our call for this measure to be extended to mortgage renewals for those who do not require mortgage insurance.”

CMBA: Price cap jump ‘reflects lack of policy change in over 10 years … will finally provide more options’

The Canadian Mortgage Brokers Association — British Columbia (CMBA-BC) and its sister organization, CMBA National, are also in support. For several years, they’ve consistently called for “real changes to address mortgage eligibility policy, (with British Columbians) having felt squeezed out of almost every market in B.C. and across Canada.”

“We are pleased to see the federal government has finally listened to our advice and expanded eligibility of 30-year mortgage amortizations to include all first-time homebuyers as well as buyers of new build homes,” says Rebecca Casey, president of CMBA-BC.

“The announcement of an increase in the price cap for insured mortgages to $1.5 million will also provide additional flexibility for homebuyers as they will not need to make a 20 per cent down payment for an additional $500,000 in purchase price,” adds Casey. “This reflects the lack of a change in this policy in over 10 years and will finally provide more options to homebuyers on how to place a downpayment on their future home.”

‘Canada can’t aim to double housing starts, or to industrialize the housing sector to achieve that, if buyers can’t buy’

“These types of changes are exactly what CHBA has been calling for, because we simply can’t build homes, be they condominiums, townhomes or whatever housing form makes sense if owners can’t qualify for mortgages,” states Kevin Lee, CEO of CHBA.

Lee explains that better access to mortgages will enable buyers to access the market, driving more housing starts and giving industry a chance to push towards targets to close the supply-demand gap. He adds, “Canada can’t aim to double housing starts, or to industrialize the housing sector to achieve that, if buyers can’t buy — it’s exactly these types of policy changes that are needed to create the conditions necessary to move forward.”

TRREB President Jennifer Pearce notes that TRREB members continue to support first-time buyers with the purchase of their homes. “The latest changes to mortgage rules are a step in the right direction and provide affordability and flexibility for homebuyers,” she says. “We look forward to our continued collaboration with CREA and the federal government as we work together to achieve our shared goal of ensuring more Ontarians can access housing and financing options that meet their needs.”

Home Buyers’ Bill of Rights Blueprint

The Canadian government also announced its release of blueprints for a Renters’ Bill of Rights and a Home Buyers’ Bill of Rights. CREA says it’s aligned with the four guiding principles laid out but will continue to engage with government as discussions evolve.

Myers points out, “The federal government has acknowledged the primary role of provinces and territories in regulating real estate and the desire to work collaboratively to build a national consensus and strengthen housing access and affordability for all Canadians.”

She notes that CREA will continue working with governments and stakeholders to develop solutions across the full housing spectrum.

CHBA response to argument of rules’ inflationary effect on market

CHBA understands that some feel improving access to mortgages will have an inflationary effect on the market, particularly now, but that the extreme under-supply of homes Canada has faced over recent years is a much stronger home price inflation driver.

“If we don’t quickly start building more houses, falling interest rates will create more demand on the limited number of homes available, further driving up prices,” Lee asserts.

“We need to come at the housing shortage from every angle, and adjusting mortgage rules is a big part of that. Canadians who want to buy their first home need a fair opportunity to do so, and young Canadians who were able to buy a starter home, like a condominium, need to be able to get an insured mortgage for their next home, for example, a new townhome.

Today’s changes will help enable them to do so, and will drive more supply of the types of housing Canada needs.”

Like much of the country’s real estate industry, Myers expresses that CREA remains focused on advocating for policies that will help drastically increase housing supply across the continuum so that all Canadians find a home that meets their needs.

Following the Bank of Canada’s third consecutive cut to the overnight lending rate this year, reducing it by another 25 basis points in September to 4.25 per cent, Canada’s housing market should see an increase in activity this fall and continue into next year.

For consumers, the drop is a positive sign that we’ve moved past the peak of high lending rates, and with further rate cuts expected, many sidelined buyers will feel confident enough to re-enter the market amid more favourable borrowing conditions. But is it enough to make a material difference in the budgets of first-time buyers?

Several hurdles besides borrowing costs: Saving for down payment, passing stress test & finding the right property

High interest rates are just one of several financial hurdles that first-time buyers have to overcome. In addition to the high cost of borrowing, saving for a down payment — which is difficult to do when rental rates are high — plus passing the stress test to qualify for a mortgage and finding an appropriately-sized property in a desirable region within their price range pose a significant challenge. More supply — most importantly, the right type of supply — is needed to help young families achieve their goal of homeownership.  

While there are government initiatives targeted at helping people save and making lending practices more favourable for the next generation of buyers, such as allowing Canadian lenders to offer 30-year amortizations for insured mortgages of new construction homes, more needs to be done to incentivize development and make the construction of new homes easier, faster and more affordable for builders.

This is especially true in the country’s most expensive and densely-populated markets, where high construction and borrowing costs remain a major barrier for developers. Without further intervention from the government, new construction will continue to decline in the coming years. 

Increase in inventory required to make homeownership attainable

While home prices have remained stable in most markets this year and declining interest rates are making owning a home a bit more accessible to some buyers who have been waiting in the wings, we cannot afford to take the spotlight off the bigger issue: there are still too few homes for our growing population.

We’re approaching the intersection of declining interest rates and home price appreciation. If activity picks up in the months ahead, we’ll reach a point where the increased affordability offered by lower borrowing costs is outweighed by price gains due to increased competition.

According to a 2023 report by the Canada Mortgage and Housing Corporation (CMHC), Canada needs to build approximately 3.5 million additional housing units by 2030 in order to restore affordability. However, experts have refuted this figure, citing that with continued population growth, hundreds of thousands more homes will be required.

For first-time buyers, a difficult choice looms: whether to transact now or hold off until further rate reductions are announced.

As sidelined buyers gradually return to the market, an increase in demand could trigger a sudden uptick in competition, resulting in home price appreciation. Cautious buyers are likely to enter the market sooner than later — while competition is low and inventory is building — while those with a higher risk tolerance will opt to continue to wait for further rate decreases. The fact remains that young Canadians should not be forced to “time the market.”

Young Canadians prioritizing homeownership

Despite higher home prices and borrowing costs having been prohibitive to young Canadians looking to enter the market in recent years, there’s still a strong desire to own a home.

A recent Royal LePage survey found that 84 per cent of Canadians belonging to the adult Generation Z and young Millennial cohort — those aged 18 to 38 or born between 1986 and 2006 — believe that homeownership is a worthwhile investment, and they are committed to achieving this goal. For many, this means making significant lifestyle adjustments, whether it be cutting back on expenses or postponing major life milestones. 

Our country’s ongoing and worsening housing supply shortage needs to be addressed immediately

Young Canadians are not only cutting back on discretionary spending (travel and entertainment, for example) but also making financial decisions that could impact their long-term stability, such as delaying education or saving for retirement, as well as other significant investments.

If there was any doubt, this should serve as further proof to policymakers and regulators that our country’s ongoing and worsening housing supply shortage needs to be addressed immediately. While the dire need for more housing inventory grows ever more crucial, the financial stability and future opportunities of young Canadians are being impacted.

It’s quite clear that young Canadians are eager to transition from renting to owning their own home, securing their place on the property ladder as their parents did. While reduced interest rates can help make homeownership more attainable for first-time buyers, this is not the only solution to the larger, more complex challenges within Canada’s real estate economy. 

Despite ongoing housing affordability issues across Canada, younger generations remain optimistic about homeownership as a valuable long-term investment. A recent survey by Royal LePage reveals that 84 per cent of Canadians aged 18 to 38 (the “next generation” of homebuyers) feel this way.

Of those who don’t currently own a home, 74 per cent consider homeownership a significant goal they hope to achieve in their lifetime. However, young buyers are well aware of the financial hurdles: 54 per cent believe that owning a home is attainable, 26 per cent are uncertain and 20 per cent doubt it’s achievable for them.

Optimism among challenges

“It is not surprising that young buyer hopefuls see immense benefits in home ownership,” notes Phil Soper, president and CEO of Royal LePage.

“What is both surprising and promising in these findings is the practical and purposeful manner in which these people are tackling affordability barriers. They are well educated on the state of the real estate market and the wide variety of government programs put in place to assist young families find homes. They are hyper-focused on saving for a down payment, which is often the biggest hurdle buyers face. And, they are open to creative solutions, such as shared ownership with friends and family, or buying a property with the express intention of renting a portion of the home to a tenant.”

For many, this drive to own property comes from a desire for long-term housing security. About 73 per cent of next-generation homebuyers prioritize homeownership for a permanent place to live, while 57 per cent believe it provides stability. Additionally, 45 per cent feel renting is restrictive due to tenant-landlord policies, and 32 per cent view homeownership as a critical part of their retirement planning.

Confident in their financial future

Even though many young Canadians face numerous barriers on the path to homeownership, 75 per cent still plan to purchase a home in their lifetime.

“The youngest cohort of homebuyers in Canada has no shortage of barriers on their path to ownership. Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates,” says Soper. “Despite these hurdles, the next generation of homebuyers remains committed to their pursuit of owning real estate, and are remarkably optimistic that they can make their dream a reality.”

Among those who are unsure or don’t believe homeownership is possible, 58 per cent cite insufficient household income to cover the costs, and 52 per cent say they lack enough savings for a down payment. Conversely, those confident in achieving homeownership attribute their optimism to diligent saving (45 per cent), career trajectories that promise high income (31 per cent) and sufficient combined household income with a partner (26 per cent).

Sacrificing for the dream of homeownership

40 per cent of those planning to buy a home expect to do so within the next five to 10 years, while 25 per cent anticipate purchasing a home in more than 10 years. Nearly 18 per cent plan to buy a home within the next three years and 13 per cent in three to five years — motivated by the possibility of lower borrowing costs.

To save for a down payment, 47 per cent are setting aside a portion of their earnings regularly, 42 per cent are focusing on maintaining a good credit rating and 34 per cent are cutting back on discretionary spending. 30 per cent live with family to save on rent and increase their savings for a home purchase.

To improve affordability, 45 per cent would consider buying a property with rental income potential and 31 per cent would consider a rent-to-own program. Despite the trend of parental assistance, nearly half (47 per cent) of respondents plan to purchase a home without financial support from family, while 32 per cent expect some form of financial help.

Delaying life milestones to save for a home

High real estate prices are prompting young Canadians to make significant sacrifices. For example, 27 per cent have postponed or canceled travel plans and 21 per cent have delayed purchasing a car to save for a home. Additionally, some are delaying moving out of their parents’ homes (21 per cent), living independently (17 per cent), starting a family (14 per cent) or saving for retirement (11 per cent).

“If policymakers needed yet another example of the impact of our nation’s chronic housing supply crisis on the financial security and well-being of young people, this is it,” Soper stresses.

Policy changes to support first-time buyers

To increase affordability, the Canadian government now allows financial institutions to offer 30-year amortizations for insured mortgages on new construction homes for first-time buyers, up from the previous maximum of 25 years. This policy aims to reduce monthly payments and make homeownership more accessible.

“We know that young Canadians are eager to transition from renting to owning, and most remain hopeful they will. Government policies that make lending practices more favourable for the next generation of homebuyers will help young families achieve their real estate dreams, especially those in the country’s most expensive markets,” adds Soper.

He says Royal LePage hopes to see these initiatives expanded to include resale homes, too.

Review the full report, including regional summaries.

Despite a challenging housing market and affordability issues nationwide, many (38 per cent) of Canada’s prospective first-time buyers under 30 are prioritizing homeownership over other life milestones, like weddings, a recent survey from RBC company, Houseful, shows. For those over the age of 30, this was 18.4 per cent.

No disillusionment

While the younger group is looking to own a home and build equity for their future, they’re well aware of current market challenges: 72 per cent note that market reports make housing seem unattainable and 71 per cent feel that homeownership will be a key piece of their retirement plan.

“Younger adults are increasingly conscious of ongoing housing affordability challenges, which motivates them to secure a financially stable future by seizing saving opportunities earlier,” explains Karen Starns, CEO of Houseful. “After getting a foothold in the market, they can gain the flexibility to pursue other life milestones that are important to them.”

Homeownership: Outranking marriage, travel & vehicles

The survey found that 40 per cent of first-time homebuyers under 30 are making homeownership an important part of their five-year plan. This is more than marriage (24 per cent), travel (30 per cent) and vehicles (33 per cent).

How young buyers are tightening their budgets

Within this same group, 72 per cent are allocating at least some portion of their monthly income toward their first home, while 24 per cent are saving over 15 per cent of their income. To help, they’re also tightening their spending, with 74 per cent of this group reducing discretionary spending like eating out.

“It’s promising to see the common trend among this segment of first-time homebuyers under 30 as they make tangible efforts for long-term financial planning at early stages of their adult lives,” notes Starns.

Of first-time homebuyers in the over-30 group, 47 per cent are putting some of their income toward a home and 61 per cent of this group are decreasing their discretionary spending.

Understanding the costs of homeownership

74 per cent of first-time homebuyers under 30 see a home purchase as the most important financial decision they’ll make in their life (compared to 54 per cent of those over 30). However, 47 per cent of the first group are confident that they understand all the costs associated with buying and owning a home.

As real estate professionals, we’re well aware of the challenges facing today’s housing market, especially for younger buyers. Millennials and Gen Z are finding it increasingly difficult to break into the market due to soaring property prices, high interest rates and the ongoing cost of living crisis.

However, shared homeownership is emerging as a strategic solution, offering a creative pathway to homeownership that aligns perfectly with current market trends.

A shift in homeownership dreams

Homeownership has long been synonymous with stability, wealth and personal success — the quintessential Canadian dream. Yet, this dream seems increasingly out of reach for many younger Canadians.

A recent BMO survey highlights a significant generational shift, with 68 per cent of Canadians believing that buying a home is less attainable now than it was for their parents. This sentiment is even stronger among Gen Z and younger Millennials, who are navigating an unprecedented affordability crisis.

The financial landscape 

The National Bank of Canada reports that housing affordability has reached record lows, particularly in major urban centres. For example, in Vancouver, the cost of a home has surged to 14.5 times the median household income, while in Toronto it stands at 11.8 times and in Victoria, 10.7 times. Meanwhile, the cost of living has increased substantially, with rent prices in urban centres like Vancouver and Toronto averaging $2,500 to $3,000 per month for a two-bedroom apartment and exceeding $3,500 for single-family homes.

These financial pressures highlight the need for innovative solutions to make the dream of owning a home achievable for younger generations once again.

The co-ownership advantage

Shared homeownership offers many benefits that make it an attractive option for prospective buyers. By dividing the costs of a down payment, mortgage and maintenance fees, this approach makes it possible for individuals to enter the housing market sooner and with less financial impact. Sharing the financial responsibility reduces the risk for each co-owner, making the investment and monthly obligations more manageable.

A Royal LePage survey conducted by Leger reveals that six per cent of Canadian homeowners co-own their property with another party, not including their spouse or significant other, and that number is growing. According to a study by Compare the Market, 61 per cent of Canadian respondents expressed willingness to buy a home with friends or family to offset costs. The concept is simple: multiple parties jointly purchase a property, sharing the costs and benefits. 

One approach to shared homeownership involves parents co-signing mortgages to help their children qualify for better financing, leveraging their financial stability for improved terms and interest rates. This has led to more multigenerational homes, where families either live together or parents provide a financial investment while living separately.

Another common structure is Tenancy in Common (TIC), allowing multiple parties to own undivided shares of a property. Each owner holds a specific percentage and has the right to use the entire property, making TIC ideal for friends or family members co-owning a home while maintaining individual ownership stakes.

A case study in modern shared homeownership

Consider the case of Liane Van Raalte, a Squamish, British Columbia-based realtor. She and her family invested in two presale units at Sokana, a Kerkhoff Develop-Build development in Penticton, B.C. Developments like this go beyond simply providing homes; they offer a lifestyle specifically designed for the new generation of homebuyers.

Increasingly, new developments are transforming the concept of co-ownership by including resort-style amenities that elevate the shared living experience. These features make shared ownership even more appealing by providing benefits that individual buyers might struggle to afford on their own.

Co-owners can enjoy state-of-the-art co-working spaces, fitness centers, rooftop pools and communal areas, enhancing their overall lifestyle. This approach shows that shared ownership not only makes homeownership more affordable but also enriches the living experience, making it a highly attractive option for today’s younger generation of buyers.

For Van Raalte, the decision to invest in Sokana was driven by the development’s unique offerings and blend of practical and luxurious amenities. “We wanted to invest in something with our children that they may potentially live in down the road while starting to build equity now, rather than wait until they are more settled in their lives,” she explains.

Key considerations for co-ownership

While shared homeownership offers many benefits, it requires careful planning and clear agreements to ensure a smooth experience. Here are some essential factors to consider when counselling clients on co-ownership options:

1. Legal agreements. Advise clients to draft a comprehensive co-ownership agreement. This document should clearly outline each party’s rights and obligations, detail financial contributions and include processes for dispute resolution and exit strategies. A well-drafted agreement is crucial for protecting all parties involved.

2. Financial contributions. Emphasize the importance of clearly defining each party’s financial responsibilities. This includes the initial down payment, mortgage payments, property taxes and ongoing maintenance costs. Clear financial delineation helps prevent misunderstandings and conflicts.

3. Responsibilities and maintenance. Encourage clients to establish a detailed plan for property upkeep and repairs. This ensures that the property is well-maintained and helps prevent disputes over maintenance responsibilities.

4. Exit strategies. Stress the necessity of a well-defined exit strategy. This should cover the process for selling a party’s share of the property, valuation methods and rights of first refusal for remaining co-owners. Having these details sorted in advance can prevent contentious separations.

5. Conflict resolution. Recommend including mediation or arbitration clauses in the co-ownership agreement. These can help resolve disputes amicably and avoid costly legal battles.

Understanding and promoting shared homeownership can help you better serve your clients, particularly Millennials and Gen Z. This model not only makes homeownership more accessible but also aligns with the evolving needs and financial realities of younger generations. By embracing innovative approaches like co-ownership, you can help turn the dream of homeownership into a reality for more Canadians.

As Vancouver’s housing prices continue their upward trajectory, the real estate landscape is undergoing significant shifts. For younger generations, particularly Generation Z and, soon, Generation Alpha, entering the housing market has become an increasingly challenging life milestone. However, a strategic trend is emerging among Generation X and Millennial parents: purchasing homes with their children’s future in mind.

According to new data from Statistics Canada, one in five homeowners in British Columbia who were born in the 1990s co-own with their parents, underscoring the urgency to invest in real estate now.

Source: Statistics Canada

This approach allows parents to not only secure a foothold in an increasingly competitive market but to also ensure their children won’t be left behind in the race for homeownership.

The ‘bank of mom and dad’

More and more, the ”bank of mom and dad” is becoming a go-to for young homebuyers needing financial help. Parents and grandparents aren’t just gifting money; they’re becoming landlords or co-investors to help their children get into the market.

In 2013, my spouse and I saw an opportunity to invest in real estate to secure a foothold in the market. We bought a pre-sale property with future generations in mind, hoping that by the time our kids were ready, they’d have a valuable asset to move into or sell. Success in Vancouver’s real estate market requires strategy and foresight.

When we made the initial investment, our children were eight and four. We realized that a proactive approach would make it easier to help them in the future. The property cost us a little over $300,000 back then, and regardless of current market trends, that put it on track to increase significantly, providing options for our children by the time they are ready to move in or resell. 

Investment properties for future generations

Throughout my almost 25-year career in real estate, purchasing investment properties as a family strategy has also become increasingly common. These investments serve dual purposes: they may not provide significant rental income in the short term, but they will largely cover mortgage and strata fee costs and act as future residences for the next generation. By securing properties now, parents ensure that their children can live nearby and benefit from generational wealth transfer.

Pre-sale properties offer an enticing investment opportunity, allowing parents to secure home ownership early and benefit from a longer period to pay off the mortgage. This strategy not only safeguards against rising market prices but also capitalizes on the property’s appreciation over time, amplifying the financial advantage. 

The Vancouver market: Rising prices and rental pressures

Over the past decade, the Vancouver housing market has experienced consistent price increases and upward pressure on rent.

According to a recent liv.rent report, today’s young people are spending over 50 per cent of their monthly income on rent, creating significant challenges in saving enough for a down payment. As a result, many are choosing to live at home longer with parents or relatives, or opting for smaller rental spaces with roommates.

Developers and multigenerational buyers

Developers are now focusing on the needs of multigenerational buyers, emphasizing properties that promise value appreciation. They prioritize prime locations with access to schools, transit, hospitals and services.

Projects like FRAME by Peterson Group showcase this trend, providing diverse unit sizes and prices to accommodate various family needs centrally located between downtown Vancouver and Metrotown. FRAME is among several developments catering to these changing preferences, ensuring families find the perfect match for their unique situations.

The broader impact of generational housing solutions

The evolving landscape of Vancouver’s real estate market, characterized by rising prices and the growing necessity for parental support, underscores a pivotal shift in how families approach homeownership.

The “bank of mom and dad” has transitioned from a supplementary aid to a foundational strategy, enabling younger generations to secure their place in the market (we had help from my parents when we took the leap in securing our first condominium investment in 2013).

Through strategic investments in properties, notably pre-sale units, families are not only navigating the intricacies of the housing market but are also laying down the groundwork for generational wealth transfer. This trend, while highlighting the challenges faced by younger buyers, also reflects a proactive and unified family approach toward ensuring long-term financial security and stability.

However, it’s important to acknowledge that this collaborative generational support is not a possibility for everyone. As the real estate market continues to evolve in Vancouver and other major Canadian cities, many potential buyers without access to help from family face increasing barriers to homeownership.

This discrepancy underscores the growing concern that homeownership may become even less attainable, contributing to a widening gap where only those with substantial family support or significant incomes can secure a place in the housing market and further reinforces the need for innovative housing solutions that serve all segments of a healthy, diverse society.

In the fluctuating Canadian real estate landscape, Generation Z, the next generation of first-time homebuyers, are aspiring to homeownership. However, they face the daunting challenges of soaring rental costs, housing scarcity and rising inflation.

Despite these obstacles, Gen Z shows resilience and adaptability, embracing frugality and seeking innovative strategies to achieve home ownership goals. 

A distinct perspective and attitude towards finance and homeownership

Born into a digital era, Gen Z brings a distinctive perspective and attitude toward finance and homeownership. Growing up in a time of economic uncertainties, they prioritize financial sensibility and have a conservative approach to money management. According to 2023 CFA Institute and Financial Industry Regulatory Authority research, 74 per cent of Canadian Gen Zs own at least one investment. 

This conservative attitude towards money is driving the group to be financial planners. Understanding the challenges of rising rental rates, cost of living and housing scarcity, Gen Z is more inclined to explore innovative approaches to homeownership and seek guidance from financial experts. Acquiring financial insight has become a top priority, as they want to learn the best tactics for saving money quickly and understand methods to increase their savings.

Let’s explore some of the strategies Gen Z uses to pursue homeownership.

Leverage the expertise of real estate advisors

As real estate advisors, we recognize the challenges Gen Z faces. Real estate brokerages can offer solutions to help the next generation enter the housing market.

For example, a question we frequently hear is whether to rent or buy. Rental property options have deteriorated; many of the available apartments are targeted toward downsizers or wealthy immigrants. Finding an inexpensive rental is nearly impossible in the Halifax market. Advisors can provide valuable insights to answer these questions, guiding aspiring Gen Z homeowners through these difficult decisions and providing a deeper understanding of the current housing market.

Invest in multi-income properties to use rental income against mortgage expenses

A strategy for Gen Z to consider is multi-income properties as a viable means to afford homeownership, leveraging rental income to offset mortgage expenses.

For some, this means purchasing a property with close friends or family and embracing a collaborative approach by pooling resources to overcome financial barriers when entering the market. For others, the properties are purchased with the intention of renting units to viable tenants, offering homeowners support in monthly mortgage payments. 

Several years back, my Gen Z colleague purchased a duplex with two friends, living in one unit while leasing out the other to tenants. This approach has continued to gain popularity among Gen Z as a means to build equity and attain homeownership.

When it comes to investment safety, real estate investments continue to reign supreme. A multi-income approach for Gen Z is a way of getting their foot in the door and having an earlier start to homeownership. 

Education for Gen Z plays a pivotal role

We see education as a pivotal role, from training sessions, seminars and finance consultations. These can cover a wide range of topics such as navigating the real estate market, the benefits of multi-income ownership or financial advice from mortgage brokers and advisors. At our brokerage, we provide access to educational seminars and connect aspiring homebuyers with resources to ensure they are ready to be homeowners. 

Attending seminars and online workshops and consulting with financial advisors and real estate professionals provides Gen Z with the knowledge and tools to navigate the real estate market effectively. 

As the real estate landscape evolves, it’s important to support the next generation of homebuyers, as they have surpassed Gen X to become the third-largest generation. With guidance and strategic planning, embracing frugality and taking advantage of collaborative investments, Gen Z can be better prepared for success in Canada’s competitive housing market.

The GTA’s condominium apartment sales increased in the year’s first quarter to 4,747, compared to the same period of 2023 and up 5.3 per cent year-over-year, the Toronto Regional Real Estate Board (TRREB) reports. Plus, new condominium listings increased by 23 per cent during this time.

All in all, buyers had more choice as average prices crept down.

‘Many renter households will have no more patience for rent increases before they consider purchasing’

“TRREB’s consumer polling, conducted by Ipsos, suggests that many renter households will have no more patience for rent increases before they consider purchasing their first home. Once interest rates start trending lower, look for condominium sales to pick up as more first-time buyers enter the market,” says TRREB’s president, Jennifer Pearce.

That said, the board also reported a 19.7 per cent year-over-year increase in condominium apartment rental transactions in Q1 2024 (to 12,541). The average rent for a one-bedroom condominium apartment dipped by 1.2 per cent to $2,441 during the same period, while the average two-bedroom rent remained unchanged at $3,139.

Prices largely stayed flat

The quarter’s average condominium apartment selling price in the GTA was $693,754, one per cent less than it was in Q1 2023.

The City of Toronto accounted for nearly two-thirds of total condominium sales and saw an average selling price of $723,186, which was 0.5 per cent less than in Q1 2023.

Source: TRREB

“As first-time buying activity increases with lower borrowing costs later this year and into 2025, inventory will be absorbed and market conditions will tighten. Increased competition between condominium buyers will result in upward pressure on selling prices,” says TRREB’s chief market analyst, Jason Mercer.

Where are most of the region’s condominiums selling?

Wahi reports that four of the 10 best-selling condominium buildings in GTA neighbourhoods were located in the City of Toronto, and three were in Vaughan. Mississauga, Milton and Richmond Hill each had one building represented. 

“The best-selling Toronto condominiums show there’s still strong demand for condos depending on the location,” says Wahi CEO Benjy Katchen.

Top sales-to-units buildings

Notably, buildings with the highest sales-to-units ratios were often completed within the past decade.

Wahi reports that three buildings had sales-to-units ratios above nine per cent: Hawthorne South Village Condos, a 213-unit mid-rise building in Milton at 9.86 per cent, Bianca Condos, a nine-storey building in Toronto’s Annex neighbourhood at 9.72 per cent and 9085 Jane Street within Park Avenue Place Towers at 9.47 per cent.

Why now’s a great time to buy a condominium

Pouyan Safapour, president of Toronto developer Devron, believes that now is the best time to buy in the condominium market. He says that although 2024 has seen a slowdown in pre-construction sales, influenced by record-high interest rates and an influx of completed units from the past three to four years, a market shift is imminent thanks to interest rates projected to decrease later in the year along with a historic population increase.

“This shift will likely result in increased sales and pricing across all projects, as lower interest rates and depleting inventory continue to drive up demand. I agree with economists like Benjamin Tal who are predicting a sharp increase in condo pricing in 2025. This presents a unique window of opportunity for buyers to make their move now, before the market undergoes this transformation.”

The call to developers

Safapour feels there’s an interesting and much needed shift in the market towards a “flight to quality and value,” with more discerning buyers who prioritize quality and value over speculative purchases. “Projects offering exceptional quality and location continue to hold value, while those lacking in these aspects face challenges,” he notes.

“As developers, it’s our responsibility to cater to the evolving needs of Torontonians by creating homes that are not only of superior quality but also meet the diverse requirements of end-users.” He says that as an industry, developers must collectively elevate standards to meet the maturing expectations of buyers.

The majority of Canadians (76 per cent) who don’t own property feel that entering the housing market is out of reach, according to a recent CIBC poll. However, over half (56 per cent) of this group are still optimistic and hold on to the homeownership dream — though just 28 per cent are currently saving up for a down payment.

Overpriced markets: largest barrier for non-homeowners

Not saving for a down payment seems mostly caused by an inability rather than unwillingness, as this inability was cited as one of the main barriers to homeownership (63 per cent). The largest barrier, noted by 70 per cent of the group, is overpriced markets.

“Housing affordability is a challenge across the country and many Canadians could use guidance on how to make their homeownership dream a reality,” says Carissa Lucreziano, vice-president, financial planning and advice, CIBC. “About 80 per cent of those we surveyed said they need advice to help them navigate the market.

Homeowners making changes to manage mortgage payments

To manage their mortgage payments, just over half of variable rate mortgage holders (51 per cent) say they’ve been spending less on everyday things. 21 per cent are paying down their mortgage faster with lump sum payments.

As for fixed-rate mortgage holders, they’re preparing for renewals in the coming years, with about 45 per cent expecting to cut back on daily expenses, while 34 per cent planning to shop around for the best rates.

Other creative ways to own property being considered

It was also found that 48 per cent of Canadians are considering moving outside a major city to get more for their money, and 26 per cent say they’d consider buying a home with friends to afford homeownership.