Recent changes in the housing market present exciting opportunities for homebuyers. As a realtor, your role is crucial in guiding clients through these updates, helping them build effective plans to achieve their homeownership goals by having them reach out to a mortgage broker to see what they are able to afford.

Knowing these new rules and guidelines will help with strategy and future goals of climbing the “real estate ladder.”

Expanded amortizations for first-time homebuyers

Starting December 15, first-time homebuyers will have access to 30-year amortizations. This change can benefit your clients in two significant ways:

1. Lower income requirement. By extending the amortization period, the income required to qualify for a home purchase decreases. This means more clients can meet the necessary criteria.

2. Reduced monthly payments. Clients will experience a decrease in their monthly payments, making homeownership more financially manageable. For instance, on a $600,000 purchase, the monthly payment could drop by approximately $250, providing greater flexibility in budgeting.

Increased insured mortgage cap to $1.5 million

For clients with high incomes but difficulties saving for a down payment, the increase in the insured mortgage cap to $1.5 million can accelerate their path to homeownership. Previously, purchasing a $1.4 million home required a down payment of $280,000. Now, as of December, clients can potentially purchase the same property with a down payment of about $115,000 — a savings of $165,000.00 in upfront requirements.

This change is also advantageous for “right-sizers” looking to downsize. It allows them to allocate more funds from the sale of their larger home toward retirement, as they can put less down on a new, smaller property. However, clients should keep in mind that closing costs, typically around 3.0 per cent of the purchase price, need to be accounted for in each scenario.

For a $600,000 purchase price, anticipate that clients will need an annual income of approximately $150,000 to meet today’s stress-test requirements.

Switching lenders at renewal: A business opportunity

While you may not initially think about how switching lenders can benefit your business, it’s essential to understand that mortgages encompass more than just interest rates. The Canadian Mortgage Charter now allows insured mortgage holders to switch lenders at renewal without undergoing a stress test. This change opens up opportunities for borrowers to shop around for better rates and terms, potentially saving them thousands of dollars.

Encourage your clients to consider lenders that don’t adhere to posted rates. This strategy can significantly reduce Interest Rate Differential (IRD) penalties.

Case in point

For example, let’s compare a $1 million mortgage with three years left on a five-year term at a 5.0 per cent interest rate: 

By choosing a monoline lender (provided qualifications are met), your client could save $25,000 in IRD penalties, allowing them to manage financial changes better and seize new opportunities.

Tax-efficient savings strategies

As well, two important tax-efficient savings methods have emerged that can empower your clients on their journey to homeownership:

1. RRSP withdrawal limit increase. The amount that can be withdrawn from an RRSP has increased from $35,000 to $60,000 per borrower. This change provides additional funds for clients to put toward their down payments.

2. First-time home saver account. Introduced in 2023, this account allows clients to save $8,000 per year in contribution room, which reduces their taxable income. Unlike RRSP withdrawals, funds from this account do not need to be repaid and any gains earned within it are tax-free. This account, however, has a sunset clause in 2028, making it vital for clients to act quickly to maximize its benefits.

These recent changes create valuable opportunities for your clients. By understanding the implications of expanded amortizations, increased mortgage caps, flexible lender options and tax-efficient savings strategies, you can help them make informed decisions on their path to homeownership.

The Canadian real estate market is a dynamic one, often influenced by several economic factors. With the post-pandemic shift in the market, we’ve witnessed a lot of fluctuation in property prices. As prices have recently increased, this trend may cause potential first-time homebuyers to hesitate when purchasing their home. 

However, when it comes to pre-construction properties, now is actually one of the best opportunities to secure a deal. Let’s walk through some of the key reasons why pre-construction investments remain a smart choice, and how you can strategically help your clients navigate the current market.

Pre-construction pricing dynamics

Best suited for first-time homebuyers, the key fundamental aspect of pre-construction properties is the pricing mechanism. Unlike investing in resale, pre-construction properties are sold at today’s prices but completed and delivered roughly three to four years later. 

What does this mean for your buyers? The price they agree to now does not reflect the final market value at the time of completion. Real estate markets are cyclical, and as history shows, property values are set to appreciate over time. Plus, pre-construction offers a flexible down payment plan best suited for first-time homebuyers. 

Many aspiring buyers are hoping for a further price drop, but by the time their pre-construction property is built, the market is likely to have rebounded, resulting in a property value increase. Essentially, buyers lock in a lower price now for a property that will be worth a lot more in the future. This inherent appreciation potential makes pre-construction properties a lucrative investment.

Helping clients adopt a long-term perspective for real estate

These days, it’s crucial for both buyers and sellers to educate themselves on why the real estate market is all about long-term perspective. The idea is to build and preserve wealth over time. 

For buyers, this means getting used to market fluctuations and understanding that patience is key. The current dip in real estate presents an opportunity to enter the market at a slightly lower cost, instead of expecting prices to go down further and that values will rise by the time their property is ready. Have these important conversations with your clients.

Taking advantage of a buyer’s market

In today’s buyer’s market, agents and brokers have a unique opportunity to guide their clients through uncertainty and position them for long-term success. Here are key strategies that can help professionals in the field increase client confidence and close deals effectively:

1. Strengthen negotiation leverage. As an agent,  the ability to negotiate effectively becomes even more critical in a buyer’s market. Educate buyers and investors on the leverage they have, not just in price but in securing favourable terms like extended deposit schedules, builder incentives or upgrade packages. Emphasize the value of these perks, and use them to craft deals that align with buyers’ long-term objectives.

2. Highlight the importance of capital utilization. In a market where things are changing by the minute and liquidity is king, it’s important to convey to your clients the advantages of putting cash reserves to work in real estate over letting them sit idle in bank accounts.

Highlighting how pre-construction properties offer a unique opportunity for growth where they appreciate over time, it’s important to note that property values are expected to rise over the next few years. Investing now means buyers are set to benefit from future appreciation. The property they invest in today at the current price could be worth significantly more by the time it’s completed, providing substantial returns on their investment. Money in low-interest savings accounts can be worth much less in the future, whereas investing in pre-construction can yield better returns.

3. Role of population growth in demand. With the growth in population around urban centres and the increasing opportunities and improved lifestyle benefits that come with it, the demand for housing is only going to increase.

Population growth means more demand for new homes, pushing property values upwards. While we already witness many developers working towards providing more housing options, the short-term price dip is only here for a while before demand increases again. New construction is finite in desirable areas, but this means it will inevitably lead to higher property prices.

Improving economic conditions also results in a return to consumer confidence and, with that, the demand for real estate is also set to increase. This cyclical recovery will bolster property values.

Seizing the moment

In a buyer’s market, the role of an agent or broker extends beyond merely facilitating transactions. It’s about empowering buyers with the knowledge, strategies and confidence they need to make sound investment decisions.

Real estate is a journey, not a sprint. By thinking long-term and making informed decisions today, your clients can set themselves up for substantial financial gains in the future.

In the fluctuating Canadian real estate landscape, Generation Z, the next generation of first-time homebuyers, are aspiring to homeownership. However, they face the daunting challenges of soaring rental costs, housing scarcity and rising inflation.

Despite these obstacles, Gen Z shows resilience and adaptability, embracing frugality and seeking innovative strategies to achieve home ownership goals. 

A distinct perspective and attitude towards finance and homeownership

Born into a digital era, Gen Z brings a distinctive perspective and attitude toward finance and homeownership. Growing up in a time of economic uncertainties, they prioritize financial sensibility and have a conservative approach to money management. According to 2023 CFA Institute and Financial Industry Regulatory Authority research, 74 per cent of Canadian Gen Zs own at least one investment. 

This conservative attitude towards money is driving the group to be financial planners. Understanding the challenges of rising rental rates, cost of living and housing scarcity, Gen Z is more inclined to explore innovative approaches to homeownership and seek guidance from financial experts. Acquiring financial insight has become a top priority, as they want to learn the best tactics for saving money quickly and understand methods to increase their savings.

Let’s explore some of the strategies Gen Z uses to pursue homeownership.

Leverage the expertise of real estate advisors

As real estate advisors, we recognize the challenges Gen Z faces. Real estate brokerages can offer solutions to help the next generation enter the housing market.

For example, a question we frequently hear is whether to rent or buy. Rental property options have deteriorated; many of the available apartments are targeted toward downsizers or wealthy immigrants. Finding an inexpensive rental is nearly impossible in the Halifax market. Advisors can provide valuable insights to answer these questions, guiding aspiring Gen Z homeowners through these difficult decisions and providing a deeper understanding of the current housing market.

Invest in multi-income properties to use rental income against mortgage expenses

A strategy for Gen Z to consider is multi-income properties as a viable means to afford homeownership, leveraging rental income to offset mortgage expenses.

For some, this means purchasing a property with close friends or family and embracing a collaborative approach by pooling resources to overcome financial barriers when entering the market. For others, the properties are purchased with the intention of renting units to viable tenants, offering homeowners support in monthly mortgage payments. 

Several years back, my Gen Z colleague purchased a duplex with two friends, living in one unit while leasing out the other to tenants. This approach has continued to gain popularity among Gen Z as a means to build equity and attain homeownership.

When it comes to investment safety, real estate investments continue to reign supreme. A multi-income approach for Gen Z is a way of getting their foot in the door and having an earlier start to homeownership. 

Education for Gen Z plays a pivotal role

We see education as a pivotal role, from training sessions, seminars and finance consultations. These can cover a wide range of topics such as navigating the real estate market, the benefits of multi-income ownership or financial advice from mortgage brokers and advisors. At our brokerage, we provide access to educational seminars and connect aspiring homebuyers with resources to ensure they are ready to be homeowners. 

Attending seminars and online workshops and consulting with financial advisors and real estate professionals provides Gen Z with the knowledge and tools to navigate the real estate market effectively. 

As the real estate landscape evolves, it’s important to support the next generation of homebuyers, as they have surpassed Gen X to become the third-largest generation. With guidance and strategic planning, embracing frugality and taking advantage of collaborative investments, Gen Z can be better prepared for success in Canada’s competitive housing market.

With the spring market blossoming and interest rates stabilizing, opportunity for first-time homebuyers continues to grow. While purchasing a home can be an exciting time for a client, navigating the complexities of the market and homeownership is often overwhelming. The role you play as a trusted advisor is crucial, especially for those entering the market for the first time.

Understanding how a property is assessed is one way prospective (and current) homeowners can make informed decisions on purchasing or selling a home. Here are three things to know about residential assessed values to help inform your conversations with clients.

1. Why values matter 

For many Ontarians, the place they call home is more than just a dwelling. It’s an investment, a cornerstone of financial stability and often their single largest asset. It’s also where they make memories with family and friends and connect with their community.

Knowing the assessed value of a home is an important detail to help ensure a first-time buyer is making an informed decision. The assessment data available through MPAC (Municipal Property Assessment Corporation) offers insights into the local real estate market and can show how the home being purchased compares to others in the neighbourhood.

It can enhance decision-making efficiency and accessibility for real estate transactions and portfolio management. All realtors in Ontario have access to this assessment data along with other insights through propertyline.ca. This online platform allows users to access real-time property information for more than five million properties in Ontario and more than 10 million properties Canada-wide, making it easy to find complete profiles on a property, estimates of current real-time market values, maps and imagery that might be helpful for decision making. 

Understanding value can also help buyers anticipate and budget for tax obligations since property taxes are calculated based on assessed home values, at a tax rate based on what the municipality determines is needed to build and run a thriving community.

2. How residential properties are assessed in Ontario

There are more than 200 factors considered by MPAC when assessing the value of a property. The five key elements your clients should be aware of are: 

• Location. The neighborhood where a home is situated significantly influences its market value. The desirability of the area often plays a crucial role in determining how much a buyer is willing to pay.
• Lot size. The area of a property’s lot is calculated by multiplying the frontage by the depth.
• Total square footage of living area. The exterior of the home is measured to determine the total area of the building. This measurement excludes areas like the basement, deck, porch or garage.
• Building age. Property value is adjusted to reflect renovations or additions, considering the actual condition of the house rather than its original construction year.
• Construction quality. The type of building materials used and the quality of finishes also play a role in determining a property’s assessed value.

3. The difference between property assessments and property taxes

First-time home ownership comes with unique experiences, like navigating property assessment and taxes for the first time.  Property assessments are available to both homeowners and local governments. Municipalities use these assessments to calculate property taxes. 

When it comes to property taxes, each of Ontario’s 444 municipalities decides how much money is needed to build and operate thriving communities – for example, building a new recreation centre and indoor skating rink, maintaining the scenic trail that runs through the neighbourhood and funding essential fire and ambulance services. The municipality then determines the municipal tax rate and collects property taxes to pay for the municipal services.

By helping your clients navigate their home purchasing journey and understand the real-time information available, they’ll develop a deeper understanding of how Ontario’s 5.6 million properties are assessed. This will help you strengthen those business relationships. 

To access resources to inform your conversations, check out our Realtor Training on topics such as how data is collected, the factors affecting real property value and how to correctly calculate property taxes. The First-time Homeowner’s Hub has also been developed to help your clients unpack property assessment, taxes and other commonly asked questions.

Houseful (an RBC company) recently conducted its First-Time Homebuyer Trade-Off Survey. It sheds light on how prospective homebuyers must make decisions — by carefully weighing their options and making compromises based on individual circumstances.

Survey findings show an interesting trend among young Canadian first-time homebuyers under the age of 30. These individuals are not only entering the housing market sooner than anticipated but are also demonstrating a willingness to embrace significant trade-offs that were traditionally perceived as deal-breakers.

“Home ownership is the beginning of generational wealth creation,” says Karen Starns, CEO of Houseful. “Many younger first-time homebuyers recognize that home ownership is a life-long pursuit, and an early start to the journey can deliver exponential long-term value to support future goals.”

Young homebuyers embrace trade-offs for early ownership

In Canada, younger first-time homebuyers are being pragmatic when it comes to homeownership, displaying greater flexibility in their preferences. Consequently, they are achieving their goals faster than originally envisioned.

Survey results indicate that a substantial portion of first-time homebuyers under 30, either recently purchased or currently in the market, are buying earlier than expected (38 per cent), compared to their counterparts over 30 (18.4 per cent).

Their accelerated timeline can be attributed to adaptable lifestyles, enabling more significant trade-offs, which have included:

Opting for cozier, smaller spaces. A majority of first-time homebuyers under 30 (65.2 per cent) are willing to settle for smaller living spaces, contrasting with those over 30 (47.2 per cent).

Prioritizing the present. Instead of fixating on a forever home, younger homebuyers prioritize properties that suit their current life stage, with only 53.3 per cent claiming to have found their dream home, compared to 72.6 per cent among those over 30.

Having flexible location preferences. Location holds less sway for younger homebuyers, with only 28.3 per cent prioritizing it, as opposed to 34.9 per cent among those over 30. Additionally, a majority of younger buyers (56.2 per cent) are open to residing more than 25 kilometres away from major cities.

Wealthier buyers exercise patience for perfection

On the flip side, a different demographic is pursuing a divergent path to achieving homeownership success in Canada. First-time homebuyers or those currently in the market with a household income between $100,000 and $150,000 are willing to bide their time to secure their ideal home.

Key insights from this group show that they’re:

Patient. Nearly half (49 per cent) of those surveyed within this income bracket have delayed or plan to delay their purchase to find their dream home, compared to just 14.6 per cent among those with incomes exceeding $150,000.

Headstrong. Home size and location remain crucial for individuals in the $100,000 to $150,000 income bracket, with less than half (46.5 per cent) willing to compromise on size (contrasting with 61.4 per cent among those earning over $150,000) and just 12.8 per cent willing to move over 50 kilometres away from their preferred city.

Satisfied. Despite the extended wait, first-time homebuyers in this income range report the highest levels of satisfaction (85 per cent) with their purchases, surpassing those with incomes above (60.9 per cent) and below (78.2 per cent) this bracket.

“As homebuyers make one of the most important decisions of their lives, they need the right support to navigate an overwhelming market with confidence,” says Starns.

For both singles and couples, getting into the market for the first time can be a huge challenge these days, particularly in 16 major Canadian cities with benchmark home prices well above $1 million. 

A study from Point2 found that all hope is not lost though. It says that in some markets, both single and coupled-off first-time buyers have a nearly equal shot of buying a home without breaking the bank.

Here are the study’s main findings.

Savings disparities

It takes significantly longer for single homebuyers to save for a starter home compared to couples. The nationwide average saving time is around four years for couples and 29 years for singles.

The required time also varies widely across Canadian cities, ranging from three to 75 years for single buyers to cover an affordable bank loan for a starter home. Couples might take about two years in 11 of the country’s largest, most affordable cities.

City disparities

Some cities, like Strathcona County, Alberta, Regina, Saskatchewan and Lévis, Quebec, show minimal gaps in saving time between singles and couples, making homeownership achievable for both groups in a relatively short time.

Source: Point2

Conversely, some Ontario cities, like Richmond Hill, Newmarket and Vaughan, have significant gaps in saving timeframes, making it much more challenging for single buyers to save for a home compared to couples (possibly up to 50 years longer).

Income disparities: A catch-22

The disparity in incomes between cities affects the ability of buyers to save, with high-income cities also having the most expensive homes.

And, although many couples can technically save faster than singles, they would also need to spend more on a larger home to accommodate two people.

High prices, low incomes in cities with $1 million+ prices

Cities with home prices exceeding $1 million (16 of them) pose significant challenges for both single and coupled homebuyers, limiting their options and making finding a starter home difficult.

Starter home scarcity

The scarcity of starter homes in highly populated urban centers adds another obstacle for first-time buyers looking to enter the housing market.

Read the full study here.