Tax data shows first-time buyers such as millennials are jumping into Alberta housing again

Millennials appear to be buying into the Canadian housing market with new zeal and the beleaguered Calgary and Edmonton markets are prime beneficiaries of a boost in first-time buyer purchases, new tax data shows.

The survey from TurboTax examines the use of the first-time homebuyer credit — a non-refundable tax credit of up to $5,000 calculated at 15 per cent and worth up to $750 in actual savings. The company won’t reveal the size of the survey for competitive reasons, but says it is “statistically significant.”

“Every little bit helps. It might let you buy a new coat of paint on your house,” said Robin Taub, a spokesperson for TurboTax and a chartered professional accountant, referring to the tax break.

The data provide a glimpse into buying activity of first-time buyer thought to be key to a continuing real estate boom. The tax software company found 3.1 per cent of millennials filing their tax returns with the software were taking advantage of that credit, as of April 2016. That was up from 2.4 per cent a year earlier.

Alberta’s two largest cities, where real estate sales have been hit by the slump in oil prices appear to be benefitting substantially from the increase in first-time buyers, many of whom are thought to be millennials, generally defined as ages 18 to 34.

Three per cent of buyers in Edmonton claimed the first-time buyer credit on their 2015 return, up from 2.4 per cent a year earlier. In Calgary, 2.6 per cent of filers reported using the credit in 2015 versus 2.4 per cent a year earlier.

“I think Toronto and Vancouver for sure is where you expect the house prices to be the highest for first-time buyers,” said Taub, noting that, on a provincial basis, Alberta had the highest use of the tax credit. “Maybe house prices are coming down just enough there.”

Toronto managed a sixth place finish, with 1.9 per cent of tax filers using the tax credit in 2015, up from 1.5 per cent a year earlier — the difference possibly attributable to condominium purchases, Taub said. In Vancouver, only 1.5 per cent of filers used the tax credit, which placed it 10th on a city-by-city comparison.

Brad Henderson, chief executive of Sotheby’s International Realty Canada, said anything that makes things more affordable helps first-time buyers, and the situation in Alberta has created a buying opportunity.

“The caveat is if they continue to be gainfully employed, and that’s the major issue (in Alberta),” he said.

Henderson said he thinks millennials are working their way into the market with more family support.

“There are higher incidence of family members providing financing, whether that’s interest-free loans, grants or whatever to try and help kids get into the first-time homebuyer market because the numbers are just much higher not just in absolute terms but in relative terms to when the parents were at the same age,” said Henderson.

His comments echo, to a degree, a survey from Royal Bank of Canada that found 24 per cent of buyers 25-34 would purchase a home today with a family member, compared to 13 per cent of the general population. The same survey from RBC found that 24 per cent of young buyers would purchase with a friend compared to nine per cent of the general population.

“This speaks to some of the affordability challenges in markets like Toronto and British Columbia,” said Erica Neilsen, vice-president of equity financing at RBC. “If you are a young buyer trying to get in and you need a down payment, often times it’s easier with a family member or a friend. I don’t think that was the case five or 10 years ago, when home prices were at different levels than they are today.”

-Calgary Herald

Number of homes on market continues to rise in Calgary

With the latest sales numbers showing no signs of improvement in Calgary’s housing market, one real estate analyst says he expects prices to fall even faster in the months to come.

Don R. Campbell, senior analyst with Real Estate Investment Network, said there is always a lag effect that keeps the real estate market from feeling the full impact of an economic downturn early on.

“It’s not until 18 months after GDP starts to drop that the economy really starts to hit the housing market,” Campbell said. “We’re now at that 18-month mark where reality and actual economics start to kick in.”

According to the Calgary Real Estate Board, March home sales in the city totalled 1,588 units — 11 per cent below the same time last year and 28 per cent lower than long-term averages for the month.

The supply of homes on the market, meanwhile, continued to rise, with 6,084 active listings in March — up 6.7 per cent and the highest level in at least two years. Calgary’s benchmark price was $442,800 in March, a 0.5 per cent decline from February and 3.5 per cent lower than levels recorded last year.

In the condo sector, benchmark prices have been trending down since late 2014. In March, benchmark condo prices totalled $281,300, seven per cent lower than levels recorded prior to the slide and 4.93 per cent lower than levels recorded last year.

After the first quarter of the year, condo sales totalled 554 units, a 17 per cent decline from the same 2015 period.

Campbell said it is almost “textbook” how the market is performing.

“There’s no timing a top or a bottom — you can’t do it in the stock market and you can’t do it in real estate,” Campbell said. “But this is a bit of an inflection point, where you are going to start to see increasingly more deals available in the condo market for those who are wanting to buy.”

Cliff Stevenson, president of the Calgary Real Estate Board, said there are no surprises in the March numbers.

“We were definitely anticipating another down month. There were no economic indicators that we would be seeing any kind of improvement,” he said.

Stevenson said it’s impossible to predict if sale price declines will accelerate from here on in, but added that prospective homebuyers seem to be taking their time, waiting to see how it will all play out.

“We are still dealing with buyers who are trying to time the bottom. They’re taking that wait and see approach and expecting further declines,” he said.

-Calgary Herald