The hands of Father Time never stop. As we reflect on the time the CIBC Wood Gundy Allan Bush Investment Team has been helping our customers attain their financial goals, we note the cycle we've witnessed. We gathered friends and family when we first started, as most advisors do. Slowly, we built our business through referrals from customers who liked what we did and how we approached our relationships with them. Not surprisingly, most of our clients are around our age, and we have worked with them for decades.

 

And as our team has had families, and we've watched our clients raise their own kids. Many things in life have stayed consistent over the years, but the discussions about how people purchase their first home have taken a disturbing turn over the past decade or two. When we bought our homes many years ago, it felt like things were achievable, and we had some choice as to where we wanted to live and how deep into debt we were willing to go. Many of us had a helping hand from our families to help us get the required 10% down while we qualified for the CMHC program.

 

Things seem less straightforward today, and the outlook for young families seems challenging. It's human nature to pontificate on how "our generation" had it harder than the current one while we walked uphill both ways to school each day before dutifully doing all of our chores the moment we walked in the door. If we take a look at the facts being presented for today's first-time home buyers, it looks as if their challenges are indeed daunting, and things are more difficult now than they were one or two decades ago.

 

Looking at the facts for one of the best indicators of housing trends in Southern Ontario, the Toronto Real Estate Board, we see that the trend in the average price for a home purchase has gone up meaningfully. [i]

Year Average Price

1990 $255,020

1995 $200,220

2000 $243,255

2005 $335,907

2010 $431,262

2015 $622,116

2020 $929,636

2023 $1,126.440

 

According to a piece in the Toronto Star in late 2023, information from the 2021 census showed that average incomes, adjusted for inflation, have increased by about 16% from $63,769 in 1990 to $73,897 in 2020.[ii] It doesn't take a degree in mathematics to see that a 16% increase in income will fall short when trying to keep up with a 341.7% increase in the price of homes.

 

What does this all mean for new home buyers?

Well, it used to mean that people considering living in the GTA had to move from the area to somewhere like the Kitchener/Waterloo area if they wanted their home-buying dollar to go farther. That still is an answer, although more compelling than before. As of April 2024, the average home price in the Kitchener-Waterloo-Cambridge area was $800,087.[iii]

 

The truth is that prices have grown out of reach for many. The cost of everything has skyrocketed over the past few years, and sometimes, it's hard to imagine how we can all continue to live in the area.

We can't all have children living at home for the rest of their lives, and not everyone is willing to move away to some of the more affordable places to live in Ontario.[iv]

 

So, what are the options for a new home buyer today?

Several programs are currently in place to help people looking to purchase their first home.

1. The Government of Ontario provides incentives to its citizens who are first-time home buyers. You can receive a land transfer tax refund of up to $4,000 in Ontario. You would pay no land transfer tax if your home's purchase price is less than $368,000. If the purchase price is greater than $368,000, then you would receive the maximum refund of $4,000. This incentive applies to both new construction and resale homes.[v]
2. The proposed 2024 budget will increase the Home Buyers' Plan limit from $35,000 to $60,000. The Home Buyers' Plan is an existing federal program that lets Canadians withdraw from their Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. Increasing the limit means that first-time home buyers can use the tax benefits of RRSP contributions to save up to $25,000 more.[vi]
3. The existing Tax-Free First Home Savings Account (FHSA) allows Canadians to contribute up to $8,000 per year and up to a lifetime limit of $40,000 towards the down payment for their first home.[vii]
4. A further proposal in the 2024 budget is the allowance of 30-year mortgage amortizations for first-time home buyers purchasing newly built homes, effective August 1, 2024.
5. Lastly, the 2024 budget proposes extending the three-year repayment grace period for Canadians who withdraw from their Home Buyers' Plan between January 1, 2022, and December 31, 2025. These first-time home buyers will now have up to five years before they need to start repayments.

 

Our families and their kids' perception that buying their first home is extremely difficult is not unfounded. Things are far worse for them than they have been in generations, perhaps ever.

 

At CIBC Wood Gundy Allan Bush Investment Team, we continue to advocate that perhaps gifting monies from your portfolio in advance of your death may be a way of helping your children now and allow you to enjoy watching them raise their own families in the safety and comfort of their own homes. We're always happy to chat with you about strategies that help you and your family live the life they've intended.

 

 

[i] historic.pdf (trreb.ca)

[ii] Toronto's cost of housing in 1990 versus 2023 (thestar.com)

[iii] Kitchener-Waterloo-Cambridge Housing Market: May. 8th, 2024 Update | WOWA.ca

[iv] The Cheapest Real Estate in Ontario for 2024 | Made in CA

[v] Ontario First-Time Home Buyer Incentives for 2024 | WOWA.ca

[vi] Putting home ownership back within reach and supporting Canadian homeowners - Canada.ca

[vii] First Home Savings Account (FHSA) - Canada.ca

[viii] Poilievre releases housing plan he says would 'build homes, not bureaucracy' | CBC News