First-time homebuyers worried they can’t afford down payments

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Millicent Wong
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According to a survey, 67% fear missing out on their dream home due to an insufficient down payment

Published on June 22, 2023 • Last updated 1 hour ago • 3 minutes reading time

Real estate signs in front of a condominium in Winnipeg. Real estate signs in front of a condominium in Winnipeg. Photo by Kevin King/Winnipeg Sun/Postmedia Network

According to a recent survey conducted by Royal LePage and Environics Research for Sagen MI Canada Inc., first-time homebuyers across Canada are increasingly concerned about not being able to afford the down payments for the homes they want.

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The survey analyzed trends among first-time homebuyers who have purchased properties in the last two years. It showed that 67 percent of those surveyed expressed a fear of missing out on their dream home due to an insufficient down payment. This is a five percent increase from the previous survey in 2021 and a 10 percent increase from the results in 2019.

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Additionally, 63 percent of first-time buyers looking to buy a home in the next two years expressed concerns about insufficient down payment, a three percent increase from 2021.

“Canadians continue to face challenges when entering the real estate market, whether it’s high interest rates, strict mortgage eligibility standards, or difficulty saving enough money for a down payment in a reasonable amount of time,” Phil Soper, CEO of Royal LePage, said in the report.

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He highlighted the difficulties first-time buyers face in today’s environment, including rising house prices, high transportation costs and the added challenge of qualifying for loans at higher interest rates due to stress tests. Despite these obstacles, first-time buyers still prioritize home ownership and consider it an important milestone.

The survey delved deeply into the specific concerns of first-time home buyers in Canada’s major metropolitan areas. In the Toronto area, 74 percent of respondents expressed concerns about insufficient down payments, down slightly from 75 percent in 2021. In the Vancouver area, the number rose to 71 percent from 69 percent last year. In Greater Montreal, 67 percent of first-time buyers shared this opinion, compared to 63 percent in 2021. Additionally, in Greater Calgary, concerns about insufficient down payments rose dramatically, with 69 percent of respondents citing a concern, up from 42 percent in 2021.

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The survey also found that nationwide, 35 percent of first-time homebuyers received financial assistance in the form of lump sum payments from their parents or relatives to help with their home purchase. In addition, 25 percent of respondents received help to cover their monthly mortgage payments. 46 percent of those who received assistance received it as a gift, while 37 percent received financial assistance in the form of a loan to pay back.

I think the idea of ​​just being able to buy a single-family home on the first try is over

Nick Polegato, real estate agent in Ottawa

Ottawa real estate agent Nick Polegato says a third of his first-time homebuyers turn to their parents and relatives for financial assistance.

“Last year when the market was really hot, obviously there was a lot of bidding wars that drove prices up,” Polegato said in an interview. “I had a first-time homebuyer who found a property he liked – he only had 5 percent to pay back. They ended up paying about $30,000 more than they expected to buy the house themselves (due to a bidding war) and were able to get their parents to contribute the remaining difference towards the down payment.”

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Polegato stressed the need to keep an eye on expectations for the type of homes buyers can afford. The current reality requires first time buyers to consider starting with a condo and building equity over time to eventually allow for the purchase of a townhome or larger property.

“I think the idea of ​​being able to just buy a single-family home on the first try is over,” Polegato said. “That’s not going to happen due to rising prices, but I still think there’s a way to get in over a longer period of time.”

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Royal LePage said Environics Research conducted the study on behalf of Sagen. The study included 2,223 interviews with Canadians aged 25 to 45 who had either bought their first home within the last two years or were planning to do so in the next two years. The online interviews took place between February 22 and March 27, 2023. Quotas were set to overvalue urban regions and weighting was applied to ensure national representation.

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