Bidding wars have for a long time been a part of the home buying experience in Canada’s hottest markets, and a new poll suggests millennials have been the most willing to engage in a bidding war during the pandemic housing boom.
Thirty-two per cent of Canadians are willing to take part in a bidding war to land their dream home, according to a new poll from TD Bank. That figure jumps to 51 per cent for would-be homebuyers under the age of 35. Fewer than one in five over the age of 55 said they would put in an offer above the asking price.
The poll surveyed 1,001 Canadians aged 18 or older.
Among respondents, nearly one fifth said they’d be willing to go as high as $50,000 over asking in order to beat out other suitors.
John Pasalis, president at Realosophy Realty, said it makes sense millennials would be the most willing to enter a bidding war.
“For starters, more affordable homes – the ones that most millennials can actually afford – are the homes that are most likely to receive multiple offers,” Pasalis said in an interview with BNN Bloomberg.
“There is also far more urgency for millennials to buy a home. This urgency is driven by home prices that are accelerating by more than 20 per cent per year in the GTA, pushing homes further and further out of reach financially, combined with the underlying need that many young households have for a long-term family sized home – a gap that our rental market doesn't fill.”
Penelope Graham, managing editor at Zoocasa Realty, said there are very real risks associated with overextending yourself to secure a home.
“First, buyers who take on a larger mortgage than they intended may struggle to make their monthly payments,” Graham said in an interview with BNN Bloomberg.
“The second, more immediate risk, is that buyers’ mortgage lenders may not agree with the home’s inflated value at the appraisal stage, and may not extend the full amount of funds, even if the buyer has been pre-approved at that amount.”
While there may be a sense of urgency among some first-time homebuyers, Toronto-based broker David Fleming with the Toronto Real Estate Group said all cohorts are making aggressive moves under the current climate, not just millennials.
“When it comes to younger buyers, half are scared out of their wits to enter this market,” Fleming said in a telephone interview. “The other half are being aggressive.”
Baby boomers, too, are making aggressive moves by taking equity out of their homes to help their children enter the housing market, Fleming said.
“It’s important to know when you’ve reached your financial limit when making an offer,” Graham said. “And how increasing your offer amount will impact your financial situation while servicing the debt on your home over the long term.”