COVID-19 Could Have Big Impact on First-Time Homebuyers

first-time homebuyers
Jill Evans/Pexels

The economic fallout from COVID-19 is hitting everyone hard.

Millions of Canadians lost their jobs in April, millions more are settling into the new reality of working from home. Small businesses are being decimated, and even Toronto’s once-near-invincible real estate sector is taking its lumps.

Worst of all, no one seems to be sure when this will end, or what the end (and subsequent new beginning) will look like.

All of this insecurity, of course, can make many people far more cautious with their money. Perhaps none more so than potential first-time homebuyers who, through the pandemic, have been made to re-think the idea of tying up all their liquidity in a single demanding (see: mortgage payments) asset at a time when ‘your next paycheque’ has so quickly and easily been called into question.

RELATED: ‘Unprecedented’ Number of Canadians Looking to Refinance Mortgages: Report

According to a recent report from Altus Group that takes data from Statistics Canada’s latest employment information for March, job growth “is a key driver in housing demand… and in particular full-time jobs.”

It’s no secret that young people have been buying houses in Canada, with 2018 numbers showing that more than 40% of first-time homebuyers in Toronto are under the age of 35. What’s more, Altus Group found that, across the country, first-time homebuyers between the ages of 25-44 accounted for more than 80% of sales for all first-time homebuyers in the past two years.

first-time homebuyers
Altus Group

In Stats Can’s report for the week of March 15-21, the employment rate (the proportion of people aged 15 and older who were employed) fell 3.3 percentage points to 58.5%, the lowest rate since April 1997. Of those in the core working ages of 25 to 54, women saw their unemployment rate jump 2.8 percentage points to 7.4%, while men saw their rate climb by 1.1 percentage points to 5.9%. Altus Group does note that of all those affected by the COVID-19 outbreak, those between the ages of 25-44 were not the hardest hit group. Though this will likely be little solace given the degree to which this group is still being affected.

first-time homebuyers
Altus Group

The easy correlation here is that the same people who are usually first-time homebuyers are also people being directly impacted by the economic fallout from COVID-19. Altus Group notes there is not yet enough data to recognize a greater pattern, and that further employment information is needed. Stats Can is currently working on a Canadian Perspectives Survey Series that will release information and data faster than their monthly updates.

One thing that could help first-time homebuyers get back into the market in a post-COVID world would be if housing prices declined, something that some analysts have already begun to predict. But, if rent also decreases, as other experts are suggesting it might, this could lead to more first-time buyers deciding to rent longer than they may have in a more predictable market.

As it stands, 3.1 million Canadian workers either lost their jobs or suffered wage loss in March. Millions more believe they’ll lose their job in April.

No one is sure yet of the full impact COVID-19 will have on the economy, but April’s data will be sure to help clarify the situation we all find ourselves in – first-time homebuyer or not.

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