Compared with 10 years ago, today's first-timers have different attitudes about home ownership and different purchasing strategies.
Don Lawby, president of Century 21 Canada, says low interest rates and regulations that allow zero-down payment financing have encouraged first-time buyers into the market in increasing numbers.
In Toronto, a typical first-time shopper buys a 700-square-foot condo in or near the downtown, with two bedrooms and 1.5 bathrooms for $196,000 or $280 per square foot.
Ten years ago, a typical first home in Toronto was a 1,200-square-foot bungalow or slightly smaller townhouse or condo, with two or three bedrooms and two bathrooms for $220,000, or $183.33 per square foot.
The price per square foot has increased 52.73 over 10 years.
"Traditionally, first-time buyers purchased older homes with the intention of fixing them up.
Now, because prices are so much higher in most markets, first-timers simply can't afford an older home because they can't afford repairs or renovations," Lawby says.
"Instead, they stretch their finances for a new condo or townhouse."
Many of today's first-timers are opting for newer detached homes or condos because they also want to focus their time on career advancement and recreation instead of home improvement projects.
"More and more we are seeing first-timer buyers buying new condos with desirable locations and amenities instead of older large detached homes needing upgrading," Lawby says.
"Many first-timers today want to be skiing or golfing, not drywalling and painting."
"Changes to the financing rules by Central Mortgage and Housing Corporation (CMHC) means that first-time buyers are buying homes with zero-to-five-per-cent down payments, something that was not possible until recently," says Lawby.
"In addition, interest rates continue to drive people to the market. Rates may increase slightly, but they will still be attractive," Lawby says. "More and more Canadians can demonstrate to lenders that their jobs are stable and that they can qualify for mortgage payments - and so the number of first time buyers continues to increase."
Several financial programs are also making it easier for first-timers to buy.
A recent 15 per cent reduction in mortgage insurance premiums, following on the heels of a 15-per-cent reduction in 2003, combined with the fact that the premium can be added onto the mortgage amount and paid off over the full amortization period of the mortgage, has been helpful in cushioning the impact of the mortgage insurance premium.
Since the early 1990s, first-time homebuyers have also been able to withdraw up to $20,000 ($40,000 per couple) from their Registered Retirement Savings Plans to use as a down payment on a home.
The withdrawal is not subject to tax if it is repaid to the person's RRSP in annual installments over a period of 15 years. This is yet another way for first-time buyers to solve the down payment conundrum and reduce their mortgage principal from the outset.
The provincial government also provides assistance to first-time buyers through its land-transfer tax rebate program.
