Homebuyers face many hurdles

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This article was published 21/09/2023 (1118 days ago), so information in it may no longer be current.

More than eight out of 10 Manitobans say they prefer to own a home instead of renting, but nine out of 10 say purchasing a home is becoming less affordable, according to the Manitoba Real Estate Association (MREA).

“This sentiment is widespread, but it is especially strong among young adults and particularly young women. The dream of home ownership is a common aspiration for many Canadians, but in recent years buying a home has been increasingly difficult, particularly for first-time buyers,” the MREA stated in its recent Improving Access to Home Ownership report.

According to the report, the housing industry is worth more than $6 billion in Manitoba, and home sales are a major contributor to the provincial economy.

In 2021, 19,672 residential properties in Manitoba sold for more than $6.56 billion in total dollars and generated more than $1 billion in economic spinoff activity. But in 2022, the residential properties sold dropped by 9.90 per cent to 17,723 worth a total of $5.66 billion.

So, what are the hurdles limiting home ownership?

“One of the impediments for first-time homebuyers in Brandon and other cities in Canada is the challenge to save up for the down payment and closing costs,” Canadian Real Estate Association director Michael Barrett told the Sun. “In Brandon today, prospective buyers are required to have a minimum down payment of five per cent, along with an additional two per cent to three per cent for closing costs. The Land Transfer Tax is also a barrier to home ownership for many who want to be first-time buyers.”

Barrett suggested the city should offer more options for starter homes, which include mobile homes on leased land, apartment-style condos, and freehold homes, both single-family and attached. He said each of these fills a niche, and there may be opportunities to further augment the supply and type of homes being offered.

“My advice to buyers looking to get into home ownership is to buy what they can afford and start building equity sooner rather than later,” Barrett said. “The first home is unlikely to be the forever home, so being prepared to compromise for the sake of affordability is essential. If your home is affordable to you, it will not be a burden to maintain.”

He explained that the development costs upfront can significantly increase housing expenses and limit housing stock growth, adding that streamlining the processes would reduce these upfront costs and create cost-effective housing solutions.

“Opportunities to streamline processes and reduce upfront costs will have a positive effect on housing inventory,” he added.

Barrett added that the City of Brandon has already taken steps to support first-time buyers through incentive programs that meet specific criteria, but emphasized the need to expand and diversify such programs in order to build a cost-effective supply of homes. He also proposed the idea of conducting a housing spectrum review with the aim of transitioning homeless individuals into homes and enabling those already housed to become homeowners.

According to MREA chief executive officer David Salvatore, the housing market across the province has slowed down.

“The housing market has cooled due to rising interest rates and inflationary pressures, which means that it is more challenging than ever for many families to manage costs day-to-day, and a mortgage may seem daunting due to increasing interest rates,” said Salvatore.

The increasing interest rates are not just affecting potential homebuyers. Financial analyst Wale Adeniji explained that the increase is also impacting the homebuyers who took the government’s low-interest loan during COVID with a short-term payment plan.

He said most of those buyers were not expecting interest rate to go as high as the current five per cent rate.

“Such buyers are now finding it difficult to cope due to higher interest rates. Though they’ve gotten the loan, their finances based on the current market trend cannot meet up with the payment plan,” he told the Sun. “Some of them that started with $1,600, are now paying as much as $2,500 or more due to the increased rate.”

As monthly bills rise, mortgage payments and rents increase, Salvatore said that it is critical that industry and government work together to ensure that Manitobans have housing options across the spectrum that meet their budget, life stage and needs.

“MREA proposes reforming the provincial Land Transfer Tax to reduce cost barriers for first-time and lower-income homebuyers. A portion of the Land Transfer Tax revenue would be allocated to invest in programs supporting underrepresented groups entering the housing market,” Salvatore said. “We also propose Shelter Spectrum Review, which will assess the roles of government and the private sector in enhancing the impact of government programs and establishing partnerships aimed at helping individuals transition from homelessness to homeownership.”

He stressed the need to prioritize the development of housing-enabling infrastructure that supports new housing developments and helps offset local costs, adding that the group plans to create a provincial red tape reduction task force and adopt housing development growth plans based on best practices from across Canada.

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