Advertisement
Canada markets closed
  • S&P/TSX

    22,167.03
    +59.95 (+0.27%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CAD/USD

    0.7380
    -0.0006 (-0.09%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • Bitcoin CAD

    94,787.48
    -1,011.41 (-1.06%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • RUSSELL 2000

    2,124.55
    +10.20 (+0.48%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • NASDAQ

    16,379.46
    -20.06 (-0.12%)
     
  • VOLATILITY

    13.01
    0.00 (0.00%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • CAD/EUR

    0.6846
    +0.0003 (+0.04%)
     

Why one couple is forgoing a white-picket fence for a condo in the city

[A white-picket fence and a garden is a dream for many first-time homebuyers, but it comes with a high price tag.]
[A white-picket fence and a garden is a dream for many first-time homebuyers, but it comes with a high price tag.]

Soon after Ian Feenstra and Amy McLellan met and fell in love, he moved into her condo in Toronto’s Long Branch neighbourhood, a picturesque village on the lake. A freelance musician who plays the tuba, he brought with him all sorts of musical gear, and, over time, the couple’s one-bedroom place started feeling more cramped than cozy. And with dreams of one day having a family, the couple decided to search for a new and bigger home.

Wouldn’t it be nice, they thought, to have a yard for the kids to run around in and the white-picket fence that people dream of?

They knew that waterfront homes would be out of the question, with starting prices around the $1.5 million mark. But early on in their house-hunt, they got a reality check. Even small bungalows in need of extensive renovations were priced at well over half a million dollars to start—an amount far beyond the budget of Feenstra and McLellan, a high-school music teacher.

ADVERTISEMENT

So they made a decision: in order to live in the city they love, they’re forgoing the dream of a white-picket fence and are buying a condo as their first home. They’ll be staying there for the foreseeable future—even if the family grows from two to three or more.

“It’s been drilled into our heads over the last couple of years that it’s going to be a real struggle to buy a house,” Feenstra says. “We both still have a desire to own a little chunk of land that has the back yard, but we both tried to look at it fairly pragmatically. We’re letting go of that chunk of land of our own for a place of our own.

“We know people who stretched to purchase the house, and we just got to point where the struggle to make payments on a house versus a nice condo just didn’t seem worth it to us,” he adds. “We’re much happier having that financial security from actually purchasing something more or less within our budget rather than … a $700,000 home that was going to need quite a bit of work.”

Feenstra and McLellan are among the many young Canadians who are moving into condos and away from the traditional high-cost housing market because of how expensive it is, particularly in the country’s major urban centres.

Housing costs are staggering: across Canada, the average price of a home in August was $456,722, according to the Canadian Real Estate Association. In Vancouver, it was $833,065; in Toronto, $710,410.

Those high prices make headlines almost daily and are a wake-up call to those who always imagined having a traditional home.

Rather than be house-poor, Feenstra and McLellan found a spacious three-bedroom condo in a family-friendly building in Mississauga with a nearby park, easy access to public transit and highways, and views of Lake Ontario.

“We discovered that if we wanted house with a yard, it would be at least a $200,000 premium for pretty much the same square footage,” Feenstra says. “We’re both planners, and we got out the spread sheet: ‘What do we think our budget is? What do we think we can spend if the mortgage rate is five percent? What happens when interest rates go up?

“We’d like to own a house at some point if the math makes sense,” he says, “but this seems like a really good plan for us in terms of affordability.”

Although their vision of a traditional house with a lawn to cut hasn’t come to fruition, the couple’s cautiousness is exactly the kind of approach that financial experts urge among aspiring homeowners.

North Vancouver, B.C. mortgage broker Karen Gibbard, president of Gibbard Group Financial, advises all buyers—whether they’re first-timers or not—do what Feenstra and McLellan did and “stress-test” their mortgage. That’s especially important given that interest rates will start rising eventually.

“When clients come to see me about their first purchase, it’s mostly always a stepping stone to get them onto the property ladder,” Gibbard says. “With today’s high [property] values, it makes it difficult to buy your dream home on the first go. You need to take a stepping-stone approach and reach for the stars as you build up equity.

“Working out a scenario of what the family finances would look like using higher interest rates is a valuable exercise,” she adds. “The most basic thing first-time buyers should consider is their budget—not what the bank says they can qualify for, but what they themselves feel comfortable paying. Don’t forget there are property taxes and other expenses along with home ownership, so it’s not just the mortgage payment itself. And [mortgage] qualification ratios don’t take into consideration a client’s lifestyle.”

Ian Black, a fee-only financial advisor at Vancouver’s Macdonald, Shymko & Co., notes that, whether it’s a condo or a house, buyers should look at all the variables—not just financial.

“Rather than try to time the market, people wanting to get in should do so when it makes sense for their own individual circumstances,” Black says. “Some people opt to put off the biggest purchase of their lives so they can save for a bigger down payment, while others are taking advantage of low rates and making accelerated or lump-sum payments to pay off their mortgage faster. Everyone’s different.”

Feenstra and McLellan, meanwhile, may still one day end up with a house to call their own, but for now, they’re happy with their first purchase as a couple being a condo.

“It’s maybe not the house that people imagine getting—it’s non-traditional,” Feenstra says. “But it’s a really lovely place and you get a lot more bang for your buck.”