For first-time buyers with secure employment, the housing market may look rather more appealing now than it has in recent years, when they struggled with affordability.
“We know for Toronto, and for Ontario as a whole, there’s been a pretty dramatic shift since the fourth quarter of last year, into a buyers’ market,” says Pascal Gauthier, economist at TD Economics. “Looking ahead to the next, say, 12 to 18 months, it is very difficult to believe that that is going to turn around, just given the economic backdrop.”
While a continued buyers’ market is good news for them, house hunters shouldn’t expect to see a dramatic drop in prices.
“In Toronto, we’re not seeing huge price declines,” says Laurin Jeffrey, an agent with Century 21 Regal Realty, “but buyers are finding a lot more selection.”
While last year, clients would find many properties had been sold before they had a chance to view them, “Now we’re going through a list of 50, taking 20 that are good and getting out to see 10 top ones.”
Mortgage broker Maria Dominelli advises clients to look very closely at their finances and lifestyle before stepping on to the property ladder.
“The first thing we want to determine is if home ownership is really right for the individual. They’ve got to look at coming up with the down payment … [and] maintaining the home. It requires not only money but a commitment in time,” says Ms. Dominelli, who works with Invis. “Make sure you do a check on that reality … so you know the disadvantages and advantages of buying.”
Mr. Jeffrey also urges clients to think about potential lifestyle changes that come with home ownership.
“If all of a sudden you’re now restricted to a weekend in Montreal and a couple of lattes, when you’re used to having dinner out [and vacationing in] Cuba, well, you’re not going to be very happy,” says Mr. Jeffrey.
If first-time buyers decide they are psychologically ready to take the plunge, there are some new government policies that can help with the finances.
Under the recent federal budget, first-time buyers can qualify for a $750 tax credit to help with closing costs. In addition, they can now withdraw up to $25,000 from their RRSPs under the Home Buyers Plan to help with a down payment, up from the previous $20,000.
First-time buyers in Toronto buying properties of $400,000 or less will receive a maximum rebate of $3,725 on land transfer tax.
Ms. Dominelli says it is always crucial for purchasers to have a back-up financial plan, but especially now in these testing economic times.
“One of the strategies is for people to actually have their mortgages registered for a longer amortization [for lower payments on paper] but to actually make their payments as though they are in a shorter amortization,” says Ms. Dominelli. “While you are working, you can afford it. If the sky falls in and you lose your job and need to bide some time, you can ask the lender to change the payments to the lower total again without having to go back and incur legal fees.”
Mr. Jeffrey believes in the value of the real estate investment. If your job prospects are good, he says, “Relax, take a breath, be smart. If you don’t need that big flat screen TV, don’t buy it. But if you need a place to live, prices are down a bit, mortgage rates are stupidly low. It’s not a bad time [to buy].”