The rise of the real estate market in Ontario has pushed nearly 40% of young aspiring homeowners in the province to give up on their dream of buying a home, according to a new report from the Royal Bank of Canada.
RBC released the results of its Spring Housing Poll on Monday, revealing that a staggering 39% of non-homeowners under the age of 40 in Ontario either somewhat or strongly agreed that they have given up on the dream of homeownership. This is slightly higher than the national response of 36%.
This comes despite the fact that 54% of Ontario respondents said they were putting away money every month to save for a new home, with the average monthly savings coming out to $1,000.
“The road to home ownership isn’t always easy and the last year has created both challenges and opportunities for home buyers,” said Vice-President of Home Equity Financing, Products, and Acquisitions for RBC Amit Sahasrabudhe. “Potential homebuyers need to look at their personal financial situation as well as the current economic environment as both can have a big impact on the ability to purchase a home.”
Of the Ontario respondents who said they plan to buy a home in the next two years, 32% said their budget is less than $500,000. According to CREA, however, the average Ontario home costs much more, coming in at $864,159.
Eighty-five percent of those same Ontarians looking to buy in the next two years say they have some money saved for a down payment, with the average amount being $50,000. That’s enough for about a 5% down payment — the lowest amount you can pay — on the average Ontario home price.
“Building up a down payment can often be the biggest barrier to buying a home, especially as prices continue to climb in the pandemic environment,” Sahasrabudhe said. “While everyone’s financial situation is different, many Canadians have been taking advantage of reduced spending over the year to build up their savings and get closer to making their dream of owning a home a reality.”
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Unsurprisingly, the historically low interest rates have encouraged more people to consider buying a home, with 35% of Ontario residents saying it’s been a factor, but Sahasrabudhe warns that aspiring homeowners need to consider their financial situation in the long term before committing to buying.
“As we continue into year two of the pandemic, knowing how much flexibility you have in your finances has never been more important,” Sahasrabudhe said. “In addition to evaluating what you can afford now, potential home buyers should put their finances through a stress test to see if they can continue to carry the cost of owning a home if interest rates increase or if they had an unexpected expense or income loss.”
And with predictions for the Ontario housing market ranging from prices continuing to soar post-pandemic to a possible market correction, there’s no way to know for sure how the market will pan out.