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25% of Gen Z Homebuyers Will Rely on Family Help For Down Payments

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Gen Z is all grown up and about to make a splash in Canada’s housing market.

Born between 1997 and 2012, Gen Z is becoming a significant buying demographic in the country’s housing market, according to survey results from Sotheby’s International Realty Canada and Mustel Group, which revealed that 37% of respondents are anticipating their first home purchase in the next five years.

But amid rapidly escalating housing prices, fully a quarter of them expect a financial gift from family towards a down payment — for 16% of respondents, it will be their inheritance — while 24% will rely on a financial institution to originate a non-mortgage loan.

In a departure from traditional homebuying, co-ownership appears poised to become a major trend among this cohort, with 24% expecting to buy their first home with a family member, and 13% with a friend or non-family member.

Among those who intend to save for their first home purchase, a high-paying salary was cited as their means by 51% of respondents, followed by 42% who said they will tighten their belts, and 41% who will supplement their primary incomes. Moreover, 67% of urban Gen Z respondents will fund their own down payments.

Although more than a third of Gen Z respondents will reportedly buy their first home within half a decade, 43% intend to follow suit in the next 10 years, 29% of whom plan on becoming homeowners in five to eight years from now. Thirty percent of respondents are planning on spending $350,000-$500,000 on their first properties, followed by 26% who reportedly anticipate spending $500,000-$749,000. Nearly half of this cohort’s first purchase will be higher-density housing, a quarter of whom likely expecting a condominium. However, 18% said they expect their first home purchase to be semi-detached or townhouse, followed by 7% stating their first purchase will be a duplex or triplex.

Interestingly, 39% reportedly expect their first home purchase to be a single-family home.

Vancouver

Gen Z survey respondents expressed confidence that they will become homeowners in the Pacific Rim city despite its overvalued housing prices. Thirty-six percent of respondents anticipate making their first home purchase in the next five years, followed by 43% who will be ready in the next decade, and 33% in five to eight years.

In spite of runaway housing prices in Vancouver, Gen Z respondents expressed a high degree of self-reliance, with 62% stating that they will pay for their own down payment. Thirty-one percent said they will rely on familial help, 23% will take out a non-mortgage bank loan, while 23% will use funds from other investments, like stocks or bonds, and 21% will rely on family.

Toronto

Toronto recently achieved the ignominious feat of becoming Canada’s least affordable city, so it’s with good reason that 84% of survey respondents said homeownership will play major role in their retirement. Moreover, 73% have high confidence in the city’s housing market.

Thirty-six percent of Toronto’s Gen Z survey respondents intend on purchasing a home within five years, followed by 44% who have a 10-year plan, and 28% who plan on buying a home in five to eight years. Thirteen percent expect to pay less than $350,000-$500,000, while 29% expect to pay up to $750,000. Nineteen percent of first-time homebuyer among the city’s Gen Z cohort anticipates paying more up to $1m for their first home, and 16% are expect to pay more than that.

Seventy percent of respondents will primarily their own down payment, while 27% will rely on a financial gift from family, and 26% anticipate taking out a non-mortgage bank loan. Meanwhile, 20% will sell financial assets to pay for a down payment on their first home purchase while 16% will withdraw from their RRSPs.

Montreal

Montreal’s Gen Z respondents are bullish on the city’s housing market, with 77% stating that homeownership is crucial to their retirement. Thirty-six percent of respondents anticipate equal returns on a home investment relative to their financial investments, while 31% expect their homes to perform better.

Montreal is vastly more affordable than Toronto and Vancouver, with 41% of respondents expecting to pay $350,000-$500,000 for their first home purchase, compared with a quarter who anticipate they will pay less than that. However, 22% expect their first home purchase to be in the $500,000-$750,000 range, while 8% expect to pay up to $1m and 4% expect to pay more than that.

Montreal’s Gen Z respondents are also self-reliant, according to survey results, with 64% indicating that personal savings will primarily fund the down payment on their first home, followed by 24% who said they will take out a non-mortgage bank loan, and 21% who will receive a financial gift from family. Sixteen percent of respondents said they will use credit card debt to fund their first down payment, and 14% will use family inheritance.

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