Most first-time buyers borrow all they can afford

85%: survey

TORONTO • The real estate market may be taking a breather, but a new survey suggests the vast majority of recent homebuyers are maxing out their budgets to purchase their first homes.

In its annual mortgage consumer study, Canada Mortgage and Housing Corp. found that 85 per cent of first-time buyers reported spending the most they could afford on their property.

Despite this, 76 per cent say they were still confident that they would be able to make their monthly mortgage payments.

Sixty per cent of first-timers and 69 per cent of repeat buyers reported having “sufficient assets” such as investments or other properties to help them if they were to run into financial trouble with their mortgage.

The federal housing agency, which has been conducting the survey since 1999, says housing affordability continues to be the most important factor cited among first-time and repeat homebuyers, when compared to other factors such as a property’s neighbourhood, proximity to work and condition.

Buying into Canadian pot companies such as Aurora was already possible in the U.S. — but it would’ve had to have been done through over-the-counter trading, which most high-end investors tend to ignore. The other issue is that some American investors are still wary about buying shares of cannabis because the drug is still illegal in most states. When these companies are listed in U.S. exchanges, they immediately gain comfort and credibility among investors, Rosen said.

The move may also be pre-emptive because of the expectation that the U.S. will follow Canada’s lead and legalize marijuana in every state — which Rosen expects will happen within the next four years. If it does come to fruition, Rosen suggests the U.S. market will become the “largest durable cannabis economy that will ever ferment.” After Aphria and Aurora, he expects Canntrust Holdings and HEXO Corp. could be next.

Listing shares in U.S. marketplaces may also be a way for Aurora and Aphria to begin to hedge toward securing a future in a potential U.S. cannabis industry, said Aaron Salz, founder of consulting firm Stoic Advisory. Salz said Aurora and Aphria’s moves were a “nobrainer,” especially in the long term.

“If they’re listing on the U.S. (markets), they’re positioning themselves to pick up assets in the U.S.,” Salz said. “The day it becomes legal, they’re definitely in a good position.”

Salz expects share prices to continue to be volatile as they are driven by retail in- vestors looking to cash in on event-driven funds. Successful cannabis companies have all mastered “swinging big” when there’s hype around the sector. So it’s of no surprise that Aphria announced its application and Aurora revealed its listing date one day after legalization in Canada.

“iow’s the right time,” said Salz. “Everyone in this industry is always concerned that you’re going to wake up tomorrow and no one is going to care. So when people care, you’ve got to make the big moves.”

The expected boost in share prices might even help these companies in expanding, said Mike Hickey, a Benchmark Company analyst. Hickey, who has buy recommendations on Tilray and Canopy, said if Aurora and Aphria are looking to make acquisitions in the future, they’d be able to get more value out of using their stock as part of the deal.

Getting a boost in share prices would only be a shortterm win, Hickey said, and that’s if they’re able to hold the higher price point. The longer-term goal for these companies should be to establish a global brand. For now, institutional investors simply remain curious.

The first step is to be listed on Wall Street. iext, they have to separate themselves from their competition using the new capital to make strategic allegiances and acquisitions to continue to grow away from being cannabis farmers to developing a brand that is globally recognized.

“I can make beer in my basement, but I’m not Bud Light,” Hickey said.

POSITIONING THEMSELVES TO PICK UP ASSETS IN THE U.S.