As home prices and interest rates continue to rise across Canada, first-time homebuyers are increasingly worried about their ability to break into the market.

According to a new survey from Royal LePage Canada, 67% of recent first-time buyers worried they would miss out on their dream home because of an insufficient down payment. The figure marks a 5-percentage-point increase from 2021, and is up 10 points from 2019.

The survey, which was conducted online in early 2023, included responses from over 2,200 Canadians who had either purchased their first home in the last two years, or planned to do so in the next two years.

When the same question was posed to the latter group, 63% of prospective buyers reported feeling worried about an inadequate down payment, a 3-percentage-point jump from 2021.

The anxiety was heightened in Canada's major cities, with a higher share of first-time homebuyers in the Greater Toronto Area (74%), Greater Vancouver (71%), and Greater Calgary (69%) expressing distress.

"The data follows a trend that we've been concerned about, which is that a shortage of housing in Canada, be it for rent or purchase, is causing anxiety among young Canadians," Phil Soper, President and CEO of Royal LePage, told STOREYS.

"They understand that when there is a shortage of something that is essential, prices are going to be driven upwards. Canadians are concerned about the cost of housing and saving for a down payment. And it definitely shows up in this report."

Soper noted that the first purchase tends to be the most difficult, and today's first-time buyers face an unfavourable trio of high prices, high carrying costs, and high interest rates, which in turn make it harder to qualify for a mortgage under the stress test.

While it's "structurally unlikely" that the Bank of Canada's latest interest rate hike, and its anticipated increase in July, will actually push more people out of the market, there will be a "psychological impact" that will help put the brakes on housing, Soper told STOREYS.

With worries -- and prices and interest rates -- mounting, more Canadians are receiving financial help from family members in order to make the arduous task less so.

Nationally, 35% of buyers reported receiving a lump sum from their parents or other relatives to assist with the purchase of their first home, while 25% received financial help with their monthly mortgage payments. Forty-six percent were given funds as a gift, while 37% got support in the form of a loan.

However, not all buyers have access to such supports. As such, some are being forced to make concessions in order to transact.

Roughly one-third of first-time homebuyers purchased property in a different neighbourhood or region than they had originally intended to due to more affordable prices, while one-third bought a smaller home than they'd hoped for.

Amongst prospective purchasers, 31% said they will compromise on the area of their first home, while 37% will seek out a smaller abode. Sixteen percent will have to seek out financial assistance from friends and relatives.

The trend of first-time and prospective buyers leaving pricier cities, like Toronto and Vancouver, in search of affordability is "not going to go away any time soon," Soper says, especially as the trend of hybrid work persists.

With economic conditions weighing on Canadians' purchasing plans, many are opting to enter the housing market later in life.

The survey found that 24% of first-time homebuyers were under the age of 30, 33% were between the ages of 30 and 34, and 43% were over the age of 35. In 2021, the figures were 29%, 38%, and 33%, respectively.

While the delayed foray into the housing market correlates to higher rates of post-secondary education and Canadians generally hitting life's milestones, like marriage, later in adulthood, the marked change between 2021 and 2023 can be attributed to the current state of the real estate market.

"The fact that first-time buyers are entering the market older than they were just a few years ago is more directly linked to the increased cost of borrowing and the unprecedented home price appreciation we saw during the pandemic real estate boom," said Soper.

"Governments at all levels must work together to address the vital need to increase housing supply significantly and quickly for future generations of homeowners in this country."

Said progress is "slow" and "grudging" Soper told STOREYS, with programs being announced but not executed. With new home construction declining, and the population rising, the problem "is already getting worse."

"There's a lot of chatter and way less action than is necessary from government officials," Soper said. "The problem will get worse and worse in the near term, unfortunately. That will put upward pressure on rents and home prices."

And in turn, homebuyer's anxieties.

Real Estate News