Canada

New Canadian Real Estate Buyers Decline, But Their Budgets Expand

Canada saw less new buyers last year. Canada Mortgage and Housing Corporation (CMHC) numbers show mortgages to new owners saw a huge decline last year. Despite the huge decline, the average balance of these new mortgages inflated. New homebuyers are taking out less mortgages, but much larger ones – especially in the suburbs.

New Owners

Today we’ll be looking at the CMHC’s new owner data, which is obtained from the Equifax credit reporting agency. A mortgage to a new owner is when the borrower takes out a new mortgage, but didn’t have one in the previous quarter. These are not just first-time buyers, but a lot of first-time buyers would are included. CMHC estimates Equifax data covers 80% of debt held at institutional lenders. They aren’t analyzing all of the data, but it’s by far the most comprehensive set available.

Mortgages To New Owners Drop Across Canada

New owners declined across the country last year. There were 959,074 mortgages to new owners across Canada in 2017, a decline of 6.5% from the year before. Kitchener-Cambridge-Waterloo is the only market with over 2,500 new owners to see growth. The market saw 5,795 mortgages issued to new owners in 2017, an increase of 2.69% from the year before. Considering the total size of the market, it’s not huge growth – but it’s growth.

The country’s largest markets saw large declines in growth. Toronto came in at 68,176 mortgages to new owners in 2017, a decline of 8.14% from the year before. Montreal had 38,651 mortgages to new owners, a drop of 3.4%. Vancouver had 30,336 mortgages to new owners, a massive decline of 16.31%. All three of these markets reported declines in loans to new owners the previous year as well.

Mortgages To New Owners In Canada (2017)

New mortgagse issued to new owners across Canada, in cities with over 2,500 loans per year.

Source: CMHC, Equifax, Better Dwelling.

New Owners Take Out Larger Mortgages Across Canada

Declines in numbers didn’t translate to smaller mortgages, it was the opposite. Oshawa’s average mortgage to new owners was  $364,989 in 2017, up 16.59% – the largest increase in the country. The Kitchener-Cambridge-Waterloo region saw an average new owner mortgage of $310,153, up 15.69%. Barrie saw the average new owner mortgage hit $321,194, up 13.97%. Yes, all of these markets were in Southern Ontario.

The country’s largest markets saw more conservative changes, Toronto excluded. Toronto’s average mortgage to new owners reached $472,954 in 2017, up 12.57% from the previous year. Montreal’s average mortgage to new owners reached $242,836, up 4.16% from last year. Vancouver saw the average mortgage to a new owner rise to $473,382, down 2.97% from the year before. All three of these markets saw increases the previous year as well.

Average Size of Mortgage To New Owners In Canada (2017)

The average dollar value of mortgagse issued to new owners across Canada, in cities with over 2,500 loans per year.

Source: CMHC, Equifax, Better Dwelling.

New owners aren’t often thought of as a large driving force for prices, but this shows they might be. The average size of mortgage taken out by new buyers rapidly expanded. Not in markets with perceived density issues either. The largest gains were in low density suburbs. This lends more evidence to the belief that buyers have been maxing their credit. Rather than using any sort of fundamental pricing factors.

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3 Comments

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  • @xelan_gta 1 year ago

    Great article. Very looking forward to see 2018 data. It will show how many people avoiding B-20 and going to alt. lenders.
    Anyone noticed that Vancouver and Toronto mortgage amounts are virtually the same in 2017?
    Those two markets (Metro areas) are much closer pricewise than many think.

  • CDid 1 year ago

    It would be really great if you used 20 year data. I think the context would be helpful. Cheers.

  • KD 1 year ago

    So Barrie’s average new buyer mortgage was up 14% and it’s average resale property sold for 14.3% more. That seems about right.

    Moreover since according to CMHC the average credit score is up, the number of people holding mortgages is down and the arrears rate has also fallen, its a little less bearish than you seem to think.

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