Friday, May 29, 2009

Property virgins boost overall housing market

Property virgins boost overall housing market
By Derek Abma,

Canwest News Service
May 27, 2009

First-time buyers are back in the housing game, and this is a crucial development to strengthening the overall Canadian housing market, a major real estate company said Tuesday.

Royal LePage Real Estate Service, in conjunction with releasing survey results of potential first-time homebuyers, said this segment vacated the market late last year but has returned.

"When first-time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt," Royal LePage CEO Phil Soper said. According to Royal LePage's survey of Canadians likely to buy a home within the next three years, lower prices were the most popular motivation for considering a purchase, cited as the most important factor by 33% of respondents.

The next most popular answers were lower interest rates (27%), the federal government's new first-time homebuyers tax credit (12%), and personal job security (10%).

Dianne Usher, a Royal LePage vice-president focused on the Toronto market, explained that first-time buyers are a crucial element to the overall housing market because of their "domino effect."

"When the first-time buyer is out there and active in the marketplace, it creates a first-time seller, a second-time buyer, a third-time buyer, and on up the food chain," she said.

First-time homebuyers occupy anywhere between 30 and 35% of the overall market, Usher said.

As the recent survey indicates, first-time buyers are particularly sensitive to affordability factors. Usher said they waited out the recent downturn until they thought prices and interest rates had bottomed out, which she says has happened.

The Canadian Real Estate Association's numbers show listed housing sales as of April had increased for three straight months on a seasonally adjusted basis after declining for the four months before that.

Usher said a important contribution of first-time homebuyers to the market in recent months has been scooping up excess inventory, helping prices rebound from their lows late last year.
She said the effect of first-time buyers is most pronounced in bigger cities such as Vancouver and Toronto.

Usher explained that younger people are most drawn to large urban areas, and such areas contain a healthy supply of condominiums, which are popular among first-time homebuyers.

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