Government policy has made it very difficult for first-time home buyers to get into anything other than a condo or townhouse.
Because recent changes to qualification rules for buyers with less than 20% down make it extremely difficult to afford a single detached home which is on average, $555,000 in the Lower Mainland. With 5% down, you would qualify on a 25 year amortization instead of 30 or 35 years which is available to buyers with 20% down. These first-time home buyers would require annual household income of $111,538. According to Stats Can, the average household income in the Lower Mainland is $67,090. In addition to this, you have to pay the full property transfer tax on any property purchased over $450,000. So on top of your down payment, you are looking at a tax bill of $9,100 just for the privilege of buying an average home in the Lower Mainland. Are you feeling their squeeze?
Why force first-time home buyers into buying condos and townhouses?
My theory is that increased demand for condos and townhouses leads to increased development which means more jobs for the construction industry. More jobs is good for the economy and for a government trying to be re-elected. The trouble with this approach is that when these same first-time home buyers are looking to move to a bigger place with a yard in a good neighbourhood to raise their family, they will have to sell their condo or townhouse at a time that may not be the best move from a financial and real estate perspective. Under these circumstances, young families will likely have to learn to make do with less space and raise their families in multi-unit properties. Only time will tell.