Canada's Condominium Magazine
If it weren’t for one remarkable statistic, the results of the latest RBC poll of Canadians’ home buying intentions wouldn’t be very noteworthy. The number of Canadians who express the intention of buying a home within the next two years has dropped to the lowest ever: just 15 per cent said that they would buy in that time. Of those who do intend to buy, 40 per cent will be doing so for the first time, a fact that RBC sees as a “bright spot” in the picture. But exactly why there has been such a drop in intentions to buy overall is not so clear.
It’s not that Canadians have lost their faith in the value of homeownership per se: 84 per cent still think that owning a house or a condo is a good investment. That number is more or less where it always is. Furthermore, over half (52 per cent) of Canadians think that now is a good time to buy. In Ontario, the split between the buy-now/buy later crowds is almost right down the middle: 52 per cent vs 48 per cent. That split is much higher in Atlantic Canada, where the majority (64 per cent) are fine with buying in today’s market.
More Canadians today (40 per cent) believe that the housing market is in a state of balance, compared to 36 per cent a year ago.
So with all of this positive thinking about the housing market, what accounts for the drop in buying intentions?
The senior vice-president of Home Equity Financing at RBC, Sean Amato-Gauci, gives the opinion that conditions in early 2012—“an unseasonably warm spring, low rates and anticipation of mortgage rule changes”—may have prompted homebuyers to get out and buy then, causing an imbalance in the market that is showing up now. He adds that the “more cautious mood” today is consistent with “broader economic and industry forecasts.”
As a more formal explanation of the downturn in buying intentions, RBC cites this poll result: 75 per cent of Canadians feel that the government’s changes to the mortgage rules will “impact or delay” their entering the housing market. However, RBC adds that this “may be more perception than reality,” given that almost 60 per cent of respondents say that the shorter amortization period (down to 25 from 30 years) and the required minimum down payment of 5 per cent, will have “little to no impact” on their decision.
Perhaps more significantly, 46 per cent of first-time buyers gave affordability as a key obstacle to their ability to buy a home—even though RBC’s own affordability measure showed just last month that housing in Canada had become more affordable in the last quarter of 2012.
Saving for a down payment has always been a major factor in buying a home, and in this survey, its importance as an obstacle has almost doubled, from 18 per cent a year ago to 32 per cent now. And more Canadians are concerned about job security today (28 per cent) than were a year ago (20 per cent).
One other point that could be affecting homebuyers’ intentions is the likelihood that mortgage rates will not be going up any time soon. About half of Canadians (49 per cent) believe that rates will be the same at this time next year. Are they therefore thinking, why rush into it now?
It’s clear that, from the point of view of buyers, there is, as RBC says, “ambiguity” and “mixed sentiment” in the Canadian housing market.