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First-time home buyers enticed into market: low interest rates one of many considerations
Jul 29, 2005

More first-time buyers are entering the housing market in Manitoba compared to a decade ago because of improved economic circumstances.

But, they are becoming homeowners at a significantly higher price than you would have paid 10 years ago, according to a survey compiled by Century 21 Canada brokers.

In Winnipeg, according to the National First-time Buyers Survey, a typical purchase 10 years ago was a 1,000-square-foot detached home with two or three bedrooms and one bathroom for $90,000, or $90 a square foot. In 1995, first-time buyers were looking for starter homes in Windsor Park, St. Vital, East and West Kildonan, Transcona, River Heights or St. James.

Today, a typical first-time purchase is a 1,050-square-foot detached home in the same areas of the city with three bedrooms and one bathroom that costs $130,000, or $123.81 per square foot, an increase of 137.57 per cent.

In Manitoba last year, 12,098 units sold at an average price of $119,245, while in 1995 sales were 10,825 units at an average price of $83,761.

Winnipeg Real Estate Board president Ruthe Penner said low interest rates, low inflation, strong job growth, high consumer confidence and an increase in Manitoba’s population suggest there won’t be a reversal in the local resale market anytime soon.

“We don’t think the record MLS® activity will drop off,” she added.

All the factors mentioned by Penner are helping first-time buyers, as well mortgages can be obtained with as little as zero per cent down.

Today, a buyer only needs equity equivalent to zero to five per cent of a home purchase price for a mortgage insured by Canada Mortgage and Housing Corporation, and the five per cent down can be financed through debt.

In 1995, a first-time buyer needed equity equal to 10 per cent of a home purchase price for a down payment, and none of the down payment could be financed through debt.

“Although home prices are much higher than 10 years ago ... first-time buyers are taking advantage of this (CMHC) change to buy, even if it means stretching their budget a little more,” said Century 21 president and chief operating officer, Don Lawby.

When it comes down to mortgage interest rates, a typical five-year term mortgage is now around 5.7 per cent, compared to 9.16 per cent in 1995. Lawby said interest rates continue to drive people into the market.

“Rates may increase between a quarter and a half of a percentage point, but they will still be attractive,” he added.

In Manitoba, the average family income is now $58,600 compared to $50,236 a decade ago. As well, people are confident they will be keeping their jobs and are able to demonstrate this to mortgage lenders. Helping their cause is an unemployment rate of 4.3 per cent compared to 7.4 per cent in 1995. 

Statistics Canada reported that the number of Manitobans seeking Employment Insurance benefits in May declined  by 10.2 per cent when compared to the same month last year.

Many first-time buyers, instead of looking for an older bungalow as was the case in 1995, are opting for newer detached homes or condos because they want to focus their time on career advancement and recreation rather than home improvement projects.

“More and more we are seeing first-timers buy new condos with desirable locations and amenities instead of older large detached homes needing upgrading,” said Lawby.

“Many first-timers today want golfing, not drywalling and painting.”

The survey indicated today’s first-timers want more features in their homes, have different attitudes about homeownership, and must employ different purchasing strategies to satisfy their preferences than first-time buyers of 10 years ago.

Markets are toughest for first-time buyers in the largest cities, such as Toronto, Vancouver, Montreal and Calgary.

In Calgary this summer, a typical first-time home is a 1,200-square-foot townhouse with two bedrooms and 2.5 bathrooms for $180,000, or $150 per square foot. 

Ten years ago, a typical first-time home in Calgary was a 1,300 square-foot townhouse with two bedrooms and 1.5 bathrooms for $90,000, or $69.23 per square foot. The price per square foot has increased 116.67 per cent over the last decade.

Perhaps the hottest first-time buyer market in Canada this summer is Fort McMurray, Alberta, where the booming oil-sands economy has pushed the price of a 1,200-square-foot townhouse with three bedrooms and two bathrooms to $285,000, or $237 per square foot. Ten years ago, a first-timer could purchase a slightly smaller townhouse for $46,000, or around $41.82 per square foot. The price per square foot has increased 467.93 per cent over the last 10 years.

On the other hand, the most accessible markets for first-time buyers this summer are in Saskatchewan, Manitoba, Atlantic Canada and the smaller cities of Ontario and Quebec.