How to help renters find their forever home

There are many reasons why people rent versus buy—and it doesn’t always have to do with money (although that can be a major factor). Whether it’s uncertainty about a job, location or a desire to wait until the market ‘crashes’ to scoop up a deal, potential home buyers often have several reasons to stall on what’s likely the biggest purchase of their life.

For the REALTOR® community across Canada, the trick is figuring out what those reasons are and showing potential home buyers where they might have alternatives. A client’s decision will be influenced by their location; comparing the housing market in Vancouver, British Columbia to Sudbury, Ontario or Calgary, Alberta isn’t exactly comparing apples to apples. But there are some common threads.

“Usually when I’m presented with a client sitting on the fence, what that usually tells me is they’re new to the city or new to the country, and they don’t want to make a big financial outlay without being really confident in the neighbourhood,” says Conrad Rygier, a REALTOR® and broker with Right at Home Realty Inc.

In those situations, he recommends clients rent for their first year until they get comfortable with the city and then they can start to shop around for a property in their preferred neighbourhoods. But if they’re already renting and on the fence about buying, their hesitation often boils down to financing.

If they’re employed, making a steady income and can afford to buy, Rygier recommends buying now—and points out the risks of waiting. “The majority of people don’t make enough money to cover the inflation of property values; every year inflation (depending on the market) can range from 5% to 15-20% on the high end,” he says. “By waiting, they’re waiting to pay more money for the same property.”

But the bigger problem he sees is that many people can’t afford to buy, especially in places like Toronto, Vancouver and Victoria. Many renters want to stay in the city, and feel their only option is to keep renting or be forced to move out to the suburbs and commute. But, Rygier points out, even buying in the suburbs is becoming increasingly expensive, as is the cost of rent.

“In Toronto’s real estate market, condo prices have been skyrocketing. In fact, the condo market was leading the industry at the end of 2018 with an 11.4% increase year-over-year,” writes broker Pierre Carapetian, with Pierre Carapetian Group Realty Ltd., in a blog.

Often, the decision to purchase comes down to the client’s ability to afford a down payment. It’s why so many young adults continue to live with their parents well into their 20s as they save up for their first home.

But not everyone can move in with their parents. They may, however, be able to take advantage of the government’s Home Buyers’ Plan, where first-time home buyers can borrow from their Registered Retirement Savings Plan (RRSP) for a down payment—tax-free—with 15 years to repay the full amount.

Following lobbying efforts from the REALTOR® community, the federal government increased the withdrawal limit in 2019’s budget from $25,000 to $35,000; that adds up to $70,000 per couple. It’s also offering several incentives to help first-time home buyers reduce their monthly mortgage payment without increasing their down payment. (Click here to see if your client qualifies).

Of course, not everyone has $35,000 in RRSPs, nor does every home buyer have a partner to split costs with. Carapetian recommends potential home buyers compare the minimum down payment to the cost of renting a similar-sized unit for a period of one year. Once they tally up the numbers, they may find they’re spending more on a year’s rent than a down payment—giving them a different perspective.

It’s one of the reasons we’re starting to see alternative arrangements, such as two people purchasing a property together who are not a couple. Or clients looking to buy in up-and-coming neighbourhoods or in less-than-convenient locations, such as those far from public transit. You can help your clients discover up-and-coming neighbourhoods with these tips from Living Room.

But for those waiting for prices to drop, Rygier likes to set the record straight. “There’s a lot of people who think the market’s going to turn and they’ll scoop up killer properties,” he says. “I don’t see that happening in southern Ontario. I can see market slowdowns and stalls, but even during the housing market crash in 2007 and 2008 core prices didn’t really drop in Toronto.”

To help your clients get on the road to homeownership, share CREA’s Journey Edition of the Home Buyers’ Road Map (you can also order printed copies in English, Chinese, Punjabi, Tagalog and French on REALTOR Link®).

The CREA Café team is responsible for the official blog of The Canadian Real Estate Association (CREA). The CREA Café is a cozy place for CREA to connect with our valued members and friends by sharing our thoughts and insights over a virtual cup of coffee.

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