Strategies for potential Calgary buyers on the cusp of homeownership
As Calgary real estate prices continue to rise, finding an affordable home is becoming increasingly difficult for many hardworking Calgarians.
The median home price in Calgary as of May 2024 rose by a significant 9.8% percent over last year, while the median price for apartments and townhomes rose by a whopping 19% and 21.6%, respectively.
As we’ve seen in other housing markets across the country and the globe, the high demand for affordable homes combined with low inventory levels in these market segments ultimately causes further upward pressure on homes priced under $500,000. In other words, lower-priced homes are increasing in value faster.
While the government and stakeholders need to take further action to address these issues, we wanted to share some potential strategies for people on the cusp of homeownership looking to enter the Calgary real estate market.
House Hacking or Co-ownership
As mentioned in last month’s blog on real estate investing, house hacking can be a valuable strategy for those who have a down payment but are looking for ways to offset the costs associated with homeownership.
Simply put, house hacking involves renting out portions of your primary residence to generate additional income you can put toward your mortgage. Some examples could include: renting out your garage or additional parking for someone’s storage or work purposes, renting out an extra bedroom to a friend, coworker, or ideal renter, or even converting your basement into a rental suite or Airbnb.
If you’ve saved some money but cannot afford a down payment on your own, you may want to weigh the pros and cons of co-ownership. Co-ownership involves purchasing a property with family members or friends to split the burden of saving for a hefty down payment and paying monthly mortgage costs or other expenses. This could be done through a joint venture agreement or by getting a co-signer for the mortgage application.
While both are effective strategies for entering the market, prospective buyers considering house hacking or co-ownership should consider possible challenges such as changing personal and financial situations or the strain co-living can place on relationships.
Clear, written agreements and a viable backup plan are essential in these cases to help navigate unforeseen scenarios and fluctuating personal situations.
Explore government programs
While there’s no doubt we’ve got work to do in terms of providing affordable housing options for Calgarians, there are various government programs and incentives designed to help first-time homebuyers and low-income families:
- Canada Mortgage and Housing Corporation (CMHC) Programs: CMHC offers mortgage loan insurance, which can help reduce the down payment requirement to as low as 5% of the purchase price.
- First-Time Home Buyer Incentive: This program provides a shared-equity mortgage with the Government of Canada, reducing the monthly mortgage payment without increasing the down payment.
- Affordable Housing Programs: The City of Calgary and the provincial government offer affordable housing initiatives, such as Attainable Homes Calgary, for low-income individuals and families.
When researching government programs, ensure you read the fine print and successfully qualify for the benefits.
Some housing programs, like Attainable Homes Calgary, will have home specialists and vetted partners who can provide direction and advice, even if they don’t have homes available.
Consider alternative housing options.
While they may differ from your initial dreams of homeownership, non-traditional housing options can provide strategic avenues to enter the market, opening the door to potential future investments.
Though modular or prefabricated homes may not have the same allure as traditional builds, they are typically less expensive and can be constructed more quickly. Additionally, purchasing a house with a legal suite can allow for a higher price point for mortgage preapproval.
Another potential option is co-op housing, where residents purchase shares in a cooperative corporation that owns or leases the housing units and/or the land. This share grants them the right to occupy a unit and participate in the cooperative’s decision-making processes.
Currently, there are about 13 housing co-operatives in Calgary, providing approximately 1,200 units. These co-ops are spread throughout the city and are managed by their residents, who collectively own the property and make decisions democratically.
For more detailed information on co-op housing in Calgary and how to apply, you can visit the Southern Alberta Co-operative Housing Association's website at SACHA.
Not without compromise
Ultimately, none of these strategies is without compromise.
If you aren’t considering relocating to a more affordable area and moving cities isn’t in the plans, you will probably have to make some concessions on specifics like neighbourhood, living space, arrangements, or ownership agreements.
While this is undoubtedly easier said than done, a positive attitude and a willingness to be flexible and think creatively will help you enter the market and generate wealth for the future.
By exploring alternative housing options, utilizing government programs, and improving your financial health, you can work towards securing a stable and affordable place to call home.
Stay informed, be patient, keep your long-term goals in mind, and don’t hesitate to contact us for assistance!
