The red-hot Canadian housing market is the subject of much speculation and debate. First-time homebuyers in tight urban markets around the country face significant challenges in jumping onto the first rung of the property ladder, while homeowners looking to move up a rung or two face similar obstacles of affordability and supply. Given these challenges — and minus a minor fortune — how exactly does one move up the property ladder these days?
We reached out to top real estate agents around Canada to ask them for advice on how to leverage your home and move up the ladder effectively in the Canadian market.
Jenna Ferguson, Jenna Rose Realty
“How can the average person living in the GTA afford to buy their forever home? The simple answer is they can't. The reality is: the average selling price of a detached home across the GTA is almost a million dollars.
We have to implement a ladder system. For my clients, this might mean looking at a small bungalow an hour or two outside the city. It could mean finding a house that needs some renovations. It might mean looking at 1-bedroom condos with not the best view. It might mean finding a house with a finished basement and renting out the top half while living in the bottom.
The point is we have to start with something that we can afford to buy right away. The average person living in Toronto and the GTA moves every three to five years and owns around four to five to 5 homes throughout their lives. To be very conservative, if the price of your home appreciates even at 3% while you're paying down your mortgage over the next five years, you're now going to have access to a lot more funds than most people can possibly save year over year.
If you are a first-time buyer, save, save, save and plan ahead. Get a pre-approval for a mortgage so you know what you’re working with. Other strategies for first-time buyers include considering a cosigner or partnering up with a close friend or family member and going in together as an investment. Don't wait too long to buy something. Look at the property with the intention of future sellability but remember you will need to make a couple of sacrifices for your first purchase. Buy now and let the market take care of the rest.
Know the added and unexpected costs of buying a home. Speak to your local realtor about closing costs
If you are already a homeowner and looking to climb up the property ladder, contact your real estate professional to see how much your current home is worth in today's market. Then contact your mortgage broker to discuss possible options for either buying a bigger home, or maybe another home as an investment.
Sometimes it seems impossible to save for that downpayment, pay off current debts, and get that credit score higher. I'm here to tell you it can be done. It might take a couple years of hard work and discipline but the reward will always be worth it.”
Zuzana Misik, Zuzana Misik Group
“Every province in Canada has a different housing market. Before you start thinking of purchasing a home, the first step is to contact a local realtor and ask for their expertise. Don't do this alone!
I have been specializing in the Toronto real estate market for more than a decade. The hardest step in moving up the property ladder in Toronto is getting onto it in the first place. But it is achievable. The sooner you get into the market, the sooner you can benefit from it.
Here are my tips for moving up the ladder:
Save, save, save. This is the best advice I can give to anyone. Live below your means. It will all be worth it one day!
Make sure you have great credit. The higher your credit score, the lower your payments will be. Pay your bills on time.
Ensure you can finance the purchase. With the mortgage market shifting at high speed, it’s essential that you work with a lender or bank to ensure you are pre-approved for a mortgage before you go house hunting.
Decide on the type of home you want as your dream home, and use it as a goal. As long as you get into the market it doesn't matter at this point the type of home you will be buying. Be patient. Let your property appreciate in value so you can achieve owning your dream home eventually.
Know the added and unexpected costs of buying a home. Speak to your local realtor about closing costs.
Plan to have a roommate or tenant. This is a great way to save money, reduce your mortgage payments, and pay off your mortgage faster.
Don’t be afraid of renovating. Renovations can add value to your home, and the profits you make each time you sell your home can provide more capital to put into your next purchase.”
Patricia Houlihan, Vancouver Views
“How one moves up the property ladder in Canada will depend in part on where they live and what is happening in the market. The real estate markets differ widely among cities.
There are good times and bad times to move up. It depends on what the market is doing.
When prices are down, that is generally a much better time to move up the ladder than when prices are up. If prices are down an average of 10%, and one is selling a $500,000 condo, they may lose $50,000 on the sale price of their condo. But if they are buying a $1-million house, the price of the house would likely be down by 10%, or $100,000. So they are gaining $50,000 in dollar terms if they sell the condo and buy the house.
On the other hand, if the market is up 10%, they may be able to sell their condo for $50,000 higher but they are paying $100,000 more on their home purchase, so they are actually losing $50,000. This is of course oversimplified but it is important to factor in market conditions.
Generally it is a lot easier and less costly to move up in a buyer’s market than a seller’s market for the same reason. Multiple offers favouring sellers aren't great when one is trying to buy up.
Another key consideration when trying to move up the property ladder is to try to add value to the home being sold, even if that is done simply through good presentation of the home for the sale.
Have a plan, a flexible timeline based on the market, and save toward moving up while in your current home. A good realtor will advise clients much beyond the current transaction and will help them use the market to their advantage, maximizing their ability to move up to their dream home as quickly as possible with as little stress as possible!”
Sam McDadi, Sam McDadi Real Estate Inc.
“My advice for first-time buyers is to get into the market, even if it's a small condo or townhouse. It will still give you the opportunity to build equity and take advantage of market appreciation.
For current homeowners, my advice is to move up the ladder when you are financially ready. You wouldn't want to over-extend yourself and end up selling to pay off large debts and have to rent as a result. Move within your means and let your equity work for you along with market appreciation.”
Jacqui Rostek, Platinum Group Halifax
“In this market you need a plan. Competition is tough, so whether it is a first home purchase, selling and moving to the next, a relocation, or a downsize, buyers and sellers need to understand their market, the inventory, the competition, and the costs. This to me means working with a solid team. A real estate agent and lender can be your best resources. All the best ones will be able to easily connect you to any other professionals you need, such as a lawyer, appraiser, etc.
Finding professionals with experience, expertise, and knowledge to guide you through each situation is crucial to success. Inventory is tight in all major markets in the country right now, yet people are buying and selling every day. It's not impossible, although it can seem that way at times.
Knowing what you want, how you can obtain it, and being realistic is a recipe for success. Buyers and sellers should not be shy to ask about the experience of the professionals they choose to work with. In my opinion the best thing they can do is make sure that their agent is not just compatible personality-wise but also has the experience to guide them through the transaction.”
Dorian Rodrigues, PSR Brokerage
“The biggest misstep buyers make when trying to enter the market is thinking they are buying their forever home.
When you're a first-time homebuyer, the key is to get into the market. Once you're in the market, you'll start to build equity and realize what's important in a home. Buyers also need to understand that they won't check every box on the list, but as long as they check off their top three most important aspects of a property, everything else can be adjusted and/or changed to their liking.
Lastly, it’s important to understand that timing the market is not effective. Even If you have to pay a few more dollars to move up the property ladder, it's OK because over time, the market will go up and you'll likely be buying and selling in the same market.”
Morgan McIndless, The Storey Team
“Start small if you have to! If you’re a first-time homebuyer with a smaller budget, don’t rule out a condo. I feel as though a lot of young people setting goals in terms of home ownership think their first house has to be just that — a house — when in reality there are so many great and functional condo properties out there.
Purchasing a condo will allow you to use the budget you have to get your foot in the door. Over the last 40 years, condos in Toronto have seen an average price appreciation of 6% per year. Once you’ve outgrown the condo, you now have equity built up, possibly a better paying job, and now you can move up the property ladder to the next level of home ownership, be it a townhouse or freehold property. Building equity in a home is one of the fastest ways to climb the property ladder.
For a homeowner or potential homeowner wanting to move up the property ladder, my advice is simple. Be prepared. Talk to a trusted mortgage professional about your finances, get educated on current market conditions, and build that team of trusted professionals behind you that will help you in the journey.”
Mike Stewart, Oakwyn Realty
“The key to moving up the property ladder is to first build a trusted team of qualified professionals to give you the best advice to reach your real estate goal.
Start by finding a good financial planner to advise on the finances to support a first property purchase or upgrade. Next, find a good accountant to advise on the tax implications or advantages of your real estate plan. A good mortgage broker is key to understanding how much you can borrow for a purchase. Once you have all of this information, having a good realtor who understands your needs, as well as the current market conditions in the area you are focussed on, will complete this team. Having these team members communicate with your permission will also help to make the process smooth and efficient.
The good news is the advice from this team is either free or relatively inexpensive, especially compared to the costly mistakes you can avoid by engaging these people. Also, finding and assembling this team is relatively easy. Start by asking trusted friends, families and colleagues for referrals and if that doesn't work, an online search should bring about some good professional options with third-party reviews that you can interview to join your team.”