Fast-paced bidding wars became the norm over the past year as Canada's red-hot real estate market continued to see demand outstrip supply, and it appears that millennials are the ones who are far more willing to submit bids over asking price than older generations.
Amid Canada's consistently competitive market, a recent TD 2021 Real Estate Survey sheds light on the willingness of Canadians to adapt to the rapidly evolving market based on their situation.
According to the survey, one-third of Canadians surveyed (32%) say they are willing to take part in a bidding war to secure their dream home, as housing prices continue to soar in many markets across the country.
In April, price gains rose at a record pace, with the actual national average home price landing slightly under $696,000, up 41.9% from the same month last year.
Interestingly, the TD survey revealed that a homebuyer's willingness to offer above asking typically varies with age. More than half (51%) of young adults under 35 are willing to offer above the list price, while fewer than one-third (31%) of respondents between 35 and 54, and just 18% of those 55 and older, are willing to do the same.
"There's no question that the price of homeownership is much more than your down payment and monthly mortgage payments," says Jared Jarman, Associate Vice President, Specialized Advice at TD.
"In today's competitive environment, buyers need to ensure they're keeping a close eye on their budget, building in some wiggle room so that they know they're able to cover expected and unforeseen costs," added Jarman.
Despite this widespread willingness among younger survey respondents to enter a bidding war, most Canadians are still reluctant to bid over-asking when multiple offers are on the table.
In this situation, 45% of respondents said they would stand firm on their initial offer. But for those willing to go the extra mile to win a bidding war, Jarman emphasized the importance of developing a budget range beforehand that allows for some flexibility. He adds that even among Canadians open to going beyond the list price for their dream home, budgeting and setting limits is critical.
The survey results also reveal how competitive Canadians are willing to be, with approximately two in ten (19%) competitive bidders saying they would exceed the asking price by up to $50,000. In comparison, just 13% would push their offer further, between $50,000 and $100,000 over-asking and beyond.
When it comes to homeownership, more than half of Canadians surveyed (52%) feel owning a home is less attainable now than it was pre-pandemic due to changing house prices.
Unsurprisingly, the survey also reveals that changes in financial security over the last year have dampened home-buying opportunities for many Canadians, with one-third of respondents saying unexpected changes in their personal finances have made the prospect of home buying less attainable now than before the pandemic.
"We know Canadians have had to deal with incredibly unprecedented circumstances this past year, including unemployment and other financial challenges for many," said Jarman.
What's more, 57% of respondents said they consider finding a home within their budget to be the biggest challenge to buying a home within the next year. Though, the ability to afford a suitable home appears to be a greater concern amongst residents in Ontario (63%) and BC (62%) compared to Quebec (48%) and the Prairies (43%).
As Canadian home prices continue to climb and the ongoing housing supply shortage persists, we'll likely proceed to see bidding wars rage on. However, we may start to notice more and more younger buyers coming to the table ready to battle.