First-time buyers delaying home ownership on account of new mortgage rules, OREA research shows
Seventy-nine per cent of firsttime home buyers in Ontario say that the federal government's new, more stringent mortgage rules will throw a wrench into their home buying plans, according to the Ontario Home Ownership Index – a semi-annual consumer study commissioned by the Ontario Real Estate Association (OREA).
Mortgage stress testing will delay home ownership for nearly half of Ontario's first-time buyers, the survey conducted by Ipsos Reid shows.
"Our survey indicates that the new stress test will have a negative impact on first-time buyers' ability to buy a home," says OREA CEO Tim Hudak. "It's important to remember who's being affected by measures that curb housing demand – a young family looking for more space, a twenty-something trying to get out of his or her parent's basement. Just when they're about to make the leap into home ownership, things get a little less affordable."
The new rules introduced last October require buyers with less than a 20% down payment to qualify for a mortgage at a higher interest rate. Thinking about how the new rules could impact them, 45% of first-time home buyers say they will need to keep saving for a 20% down payment before buying a home; 27% believe they will need to find additional money to increase their down payment, and many say they will need to look for a less expensive home either in the same city (34%) or a different city (22%).
"Mortgage stress testing, rising house prices, lack of supply – we're dealing with a real estate market that is getting tougher and tougher for the first-time buyer to break into, especially in the GTA," says Hudak. "Rather than focusing on policies aimed at curbing demand, let's consider boosting the housing supply or enforcing measures that make home ownership more affordable like the provincial government did this month."
As of January 1, Ontario's first-time home buyers are eligible to receive a $4,000 land transfer tax rebate, an increase of $2,000. Conversely, in Toronto, the City is considering an increase to the Toronto land transfer tax, a move that will further reduce home affordability for young families. If Toronto matched the relief offered by the province, Toronto home buyers would get back $12,000 in land transfer tax rebate.
"More rebate means more money in the pockets of firsttime buyers which benefits both home owners and the province," says Hudak. "The money that home buyers get back either ends up going towards their mortgage or more often they spend it on furniture, appliances, renovations. The economic spin-off that comes with every home sale is immense. In this regard, the City of Toronto stands more to gain from giving its home buyers more rebate, rather than a tax increase."
The Ontario Home Ownership Index is designed to reflect Ontarians' overall views of the residential real estate market in Ontario, and incorporates measures such as Ontarians' perceptions of whether the market in their neighbourhood, city, and Ontario, respectively, have improved or worsened in the last year and looking ahead into the future, whether home ownership is important to them and whether it is a good investment in the long-term.
For the full press release, visit www.orea.com/About/News-andPress-Releases (RMM)