For many young homebuyers, the days of being able to follow in their parents’ footsteps and buy a traditional, detached starter home have largely come to an end in Canada’s big cities, according to realtors.
“In most cases, I would say the traditional idea of a starter home is completely dead,” Rhiannon Foster, the owner of the Opportunity Homes Collective under Century 21 In Town Realty in Vancouver, told Yahoo Finance Canada in a phone interview.
“Traditionally, starter homes used to be about 2,000 square feet and that was where families laid their roots down. And it’s just not possible these days with the actual cost associated with larger cities.”
Now, a starter home for many young Canadians is more likely to be a condo, she says.
That’s the same trend that Cailey Heaps, a Toronto-based realtor and chief executive of The Heaps Estrin Team, says she’s seeing, as the price of single-family homes has soared in recent years.
“It’s remarkable to think about a starter home being north of a million dollars. That just seems wild to me, but in reality, that’s what it is in Toronto unless you’re in a condominium,” she said.
The latest March data from the Toronto and Vancouver regional real estate boards show the average price of a detached house hovered around the $1.8 million mark in each of the cities, while a condo averaged roughly $740,000.
Another trend Heaps is seeing is some young buyers skipping over what would typically be thought of as their starter home and moving straight into their ‘forever’ home, a move that usually involves some form of inheritance of money.
“A number of buyers, I think, are getting living inheritances from families so they can skip the starter home and get into a more permanent home,” she said.
“I think a lot of that is the generation of parents who are now in their 60’s, 70’s or 80’s that have accumulated so much wealth from their real estate. Although they have never viewed it as an investment, it has turned out to be a very solid investment for them. And they want the same for their children.”
Kyrsten and Ciaran Nicoll, who are both 29 years old and working full time, are in the process of closing their first home, a one-bedroom plus den in a low-rise building in Vancouver. They have lived in their current rental unit in the city for a couple of years.
Part of the reason they are able to buy a home now is because of a financial windfall from Ciaran’s grandfather that made up most of the couple’s downpayments.
They knew when they started house hunting that they likely weren’t going to get a detached property and certainly not in the city of Vancouver.
“We knew we weren’t putting a downpayment on a house. We figured we would be lucky if we were able to find a townhome but it was looking to be more smaller condos, which we were both comfortable with as long as it was bigger than the space we currently have,” Kyrsten said via phone.
“It was kind of stressful and disheartening when you see all the costs and how high the market is right now, especially in Vancouver. We had to cross Vancouver completely off the list because there was nothing that we would have liked here within our budget. “
They ultimately decided on a condo in New Westminster that came in under their maximum budget of $500,000.
Kyrsten says she’d be fine with staying in the condo for the next several years but isn’t sure what their next step up in the property ladder might look like.
She says she’d prefer to stay in the Lower Mainland but might have to look further out to Surrey, Abbotsford or beyond if they want to get into a detached home.
Impact of shrinking starter homes
The impact of shrinking starter homes is twofold, according to Foster. The first being that some couples are having to delay starting a family because it’s “difficult to fathom how you would build a family” in a small one-bedroom condo.
The other issue is young people leaving BC altogether and heading to provinces with more affordable housing, such as Alberta, she says, a trend that’s also seen in Ontario.
Both Foster and Heaps want to see more “missing middle” housing being built.
In the real estate world, the missing middle refers to the lack of mid-sized housing developments that bridge the gap between single-family homes and condo towers.
“The big issue in housing is how do we address the missing middle? How do we keep our talent in the city – so our nurses, our teachers, our healthcare workers – all of those people at some point are going to want to put roots down for their family. If they can’t afford to do that in Toronto, we will lose them to peripheral markets,” Heaps said.
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.
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