Most of Gen Z buyers are using their savings for a down payment.Photo: Spiroview Inc. / Adobe Stock

When it comes to financing their first home purchase, Canada’s youngest homebuying generation says that they’re doing it on their own by dipping into their savings.

A new generational trends report published by Mustel Group and Sotheby’s International Realty Canada shows the majority of Generation Z buyers are “self-reliant in saving for their first homes.”

The data used in the report was gathered online from a survey of 1,502 Gen Z adults between the ages of 18 and 28 in four major Canadian cities — Toronto, Vancouver, Calgary and the Montréal Census Metropolitan Areas (CMAs).

Sixty-seven per cent of urban Canadian Gen Z purchasers said the primary source of their down payment will be from their personal savings. Meanwhile, 25 per cent stated that financial gifts from family would be their main source of down payment funding. Other respondents said that they would use a loan from a financial institution other than a mortgage (24 per cent), the sale of financial assets like stocks and bonds (18 per cent) and family inheritance (16 per cent) for their down payment.

“The influence of Generation Z is rising with each passing year, and their impact on Canada’s real estate market is set to be substantial,” said Josh O’Neill, general manager of Mustel Group, in the report. “Results from this survey reveal the high level of confidence that young Canadians have in housing and demonstrate how they are overcoming financial barriers to attain home ownership.”

Overall, 37 per cent of urban Canadian Gen Z adults said that they expect to buy their first home in less than five years. A larger portion of the same generation anticipates buying between five and 10 years from now (43 per cent), while 29 per cent of respondents expect to purchase in five to eight years. A third (30 per cent) of Gen Z adults say the purchase price of their first home will be between $350,000 and $499,999, while 26 per cent expect to pay $500,000 to $749,999.

As noted in a previous Sotheby’s Canada study, most Gen Z buyers anticipate purchasing a higher-density housing type. Twenty-five per cent, 18 per cent and seven per cent of those surveyed said that they’ll likely buy a condo, an attached home or townhouse, or a duplex/triplex as their first home.

Gen Z cuts dining out, delays having children to save for down payment

Like many who are trying to save for a down payment these days, Gen Z has a strategy for saving their pennies.

More than half (51 per cent) of respondents said that they plan to secure a full-time job with a higher salary to save for their first home. Other popular options include reducing or eliminating personal spending (42 per cent), making extra income through a second job (41 per cent) and reducing or eliminating eating out (37 per cent).

Some Gen Z buyers also intend to live with family (30 per cent), reduce or eliminate vacations (29 per cent), put off having a child (28 per cent) and reduce or eliminate expenses (25 per cent) in order to save.

Other young home buyers are also open to alternative forms of ownership to get into the market. Nearly a quarter (24 per cent) of urban Gen Z adults expect to co-own their first home with family, while 13 per cent anticipate to co-own with friends or others who are not family.

Despite the difficult odds some face in today’s home market, the majority of Gen Z adults (83 per cent) agree that home ownership will play a major role in achieving a financially stable retirement, 40 per cent of whom said that they “strongly” agree with this sentiment.

“Many amongst this resourceful generation are planning their first real estate move and are taking major steps and making considerable sacrifices to save for their first down payment,” said Don Kottick, president and CEO of Sotheby’s International Realty Canada, in the report.

“With one in three Gen Z adults expecting to buy their first home within the next five years, we can only expect the social, economic and political clout of this group to have a growing influence on the Canadian housing market,” he added.

70% of Toronto Gen Z buyers will use their own savings

Even in Canada’s most expensive cities, Gen Z buyers still intend to primarily fund down payments by themselves.

In Vancouver, 62 per cent of survey respondents said that their personal savings will be a primary funding source for their down payment, followed by family support (31 per cent), other finance loans (23 per cent), and selling financial assets (23 per cent). Compared to the national average, a higher number of Gen Z adults in Vancouver said that they would use a family inheritance for their down payment at 21 per cent versus 16 per cent.

Over in Toronto, an overwhelming 70 per cent of Gen Z buyers said personal savings will be the primary funding source for their down payment. Twenty-seven per cent said they would use a financial gift from family and a loan from a financial institution (26 per cent). Twenty per cent said they would use funds from sale of financial assets and withdrawal from RRSPs (16 per cent).

Gen Z adults in Toronto and Vancouver were more likely to co-own their first home with family at 26 per cent and 27 per cent, respectively.

The majority of buyers in Calgary and Montréal said that they would primarily use their personal savings for a downpayment, both at 64 per cent. Seventeen per cent and 21 per cent of Gen Z adults in Calgary and Montréal said that they expect financial support from family for their down payment.

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