Should you wait for your dream home?
With a surge in home prices and mortgage rates, saving for a down payment seems to be an uphill battle, and owning a detached home might feel far out of reach. A recent Leger survey commissioned by Aviso revealed that two-thirds of Canadian home buyers, regardless of their age, plan to purchase a detached home. This is still the case despite detached home prices usually being the costliest choice.
But what if, instead, you consider beginning your journey in a cozier setting, a start that fits your budget and gets you on the property ladder sooner? Starting smaller doesn't mean giving up on your dream—it means you're strategically moving closer to it. Patience and adaptability can be your greatest allies in this journey, fortifying your nest egg as you climb the property ladder, one rung at a time.
Homebuyer preferences
As we mentioned, despite lower-priced housing options, a whopping 64% of Canadian home buyers plan to buy a detached home – triple that of any other type of dwelling. This statistic shows that the preference for a detached home is not uncommon, and many others share those housing aspirations.
Other types of dwellings proved less popular. Of home-buying Canadians, 19% are planning to buy a condo, 17% a semi-detached home, 16% a townhouse, and 5% expect to purchase a fixer-upper.
Though prices vary dramatically by region and by individual home, detached homes tend to be the costliest option. The Canadian Real Estate Association (CREA) reported that in January 2024, Canada’s average home sale price was up, rising 7.6% year over year.
Higher prices mean saving for longer
With housing prices rising (along with everything else) and mortgage rates higher than they’ve been in years, detached home affordability is out of reach for many. The majority of survey respondents indicated a strong preference for homes in suburban or urban areas, which means most buyers are looking at higher detached home prices.
Yet many Canadians keep saving, waiting for a detached home to enter the real estate market. But waiting means saving for a minimum down payment that keeps rising along with home prices. The longer it takes, the more that home purchase can feel like an unattainable goal.
Working your way up
Depending on your age, financial goals and personal situation, it could be worth considering getting into the real estate market in something other than a detached home. Rather than holding out for your dream detached home, starting with something smaller and potentially less costly could let you buy something sooner and then work your way up to a detached home. This strategy not only gets you into the market sooner but also allows you to build equity in your own non-detached home, a valuable asset that can help you in your journey towards your dream home.
Ways to save for a down payment
If you’re wanting to buy a home, keep in mind that the all the homebuyer incentives, tax breaks and saving vehicles work for more than just detached homes. These tools are designed to help you save for your dream home, regardless of its size or type, and can significantly ease the financial burden of a down payment.
The First Home Savings Account (FHSA) allows you to contribute up to $8,000 a year (lifetime maximum $40,000). Like with an RRSP, your annual FHSA contributions can be claimed as an income tax deduction, and the savings go to a qualifying home; the withdrawal is not taxable.
The Home Buyer’s Plan (HBP) in your Registered Retirement Savings Account (RRSP) allows first-time homebuyers to withdraw up to $35,000 tax-free from their RRSP to purchase or build a new home.
Funds in your Tax-Free Savings Account (TFSA) can be used for home purchases. The savings are easily accessible, and withdrawals from your TFSA are tax-free and can even be recontributed later. You can use your TFSA savings with the HBP and withdrawals from an FHSA.
If you’re someone with the lofty aspirations of home ownership in Canada, particularly the dream of owning a detached home, it's clear that strategic financial planning is more crucial than ever. The path to realizing this dream may require patience, adaptability, and a willingness to start with what is achievable. Utilizing saving vehicles like the First Home Savings Account, the Home Buyer’s Plan, and a Tax-Free Savings Account can offer significant support in accumulating a down payment.
Whether you're stepping into the housing market for the first time or aiming to climb the property ladder, it's essential to stay informed and make use of all available resources to make your dream of home ownership a reality. Remember, the key to securing your future home begins with a solid foundation of savings and financial strategy.
Don't let the dream of owning a detached home discourage you. Instead, let it motivate you to start smaller, save smarter, and enter the housing market on your own terms. With each step, you're not just buying a property; you're investing in your future and making your dream of homeownership an achievable reality.
About the Study
An online survey of 2,016 Canadians aged 18+, including n=433 credit union members, was completed between December 12 and December 21, 2023, using Leger’s online panel. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, a probability sample of 2,016 respondents would have a margin of error of ±2.2%, 19 times out of 20.
Aviso Wealth Inc. ('Aviso') is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Aviso Financial Inc. (including divisions Aviso Wealth, Qtrade Direct Investing, Qtrade Guided Portfolios, Aviso Correspondent Partners), and Northwest & Ethical Investments L.P.
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.