Fewer Canadians thinking of home-buying due to inflation: survey

Could the homebuyer frenzy seen during the pandemic be winding down?

Fewer Canadians intend to purchase a home in the near future compared to the last two years of the pandemic, according to a home ownership report released by RBC on Monday, with many concerned about how rising inflation will affect their ability to secure a home.

As Canadians transition into a post-pandemic mindset, home-buying attitudes are shifting. According to the annual poll, which surveyed 2,753 Canadians in January 2022, some 23 per cent of respondents said they intend to purchase a home in the next two years, compared to 30 per cent in 2021. That’s more in line with attitudes seen in January 2020, when 22 per cent intended to buy.

Andrea Metrick, senior director of home equity financing, acquisition and distribution at RBC, says Canadians may be taking a step back due to rising costs, along with the competitiveness of the market.

Nationally, the year-over-year percentage change in the MLS home price composite index skyrocketed to more than 29 per cent in February 2022 — the highest year-over-year growth in at least 16 years.

The RBC survey also found that nearly half of respondents, or 48 per cent, were worried about the impact rising inflation will have on their ability to purchase a home. Four in 10 respondents said they felt “financially overwhelmed,” while 42 per cent were worried their financial situation would deteriorate over the next year.

“The key stressor for these homebuyers is affordability,” said Metrick. “And they’re really asking themselves a couple of key questions around affordability: Firstly, what will I be able to afford? Secondly, when will I be able to afford it? And third, where will I be able to afford it?”

These questions around affordability, especially as Canadians emerge from the pandemic, are creating a level of uncertainty for homebuyers, thus affecting market interest, Metrick added.

Frank Clayton, a senior research fellow at Ryerson University focusing on urban and real estate market issues, also says homebuyers are starting to realize that prices don’t go up continually all the time and are now starting to wait until the market is more affordable.

“There was this euphoria in the market the last couple of years where people thought, ‘If I don’t get in today, I’m going to lose out because I won’t be able to afford tomorrow,’” he said. “But I think more people are starting to say ‘We can’t afford it, so let’s just hold off.’”

Tom Storey, a sales representative with Royal LePage Signature Realty, says rising interest rates is another reason why Canadians are holding off purchasing a house right now.

“That would be the biggest psychological factor at least in terms of what people are thinking about,” he said. “Especially with what the reports of inflation are, the Bank of Canada is going to have to raise the rates a few more times to battle inflation.”

The report also found that one in four respondents said housing prices have impacted major milestones in their life. Of those, 47 per cent said thinking about buying or saving for a home is causing stress in their relationships, while three in 10 said they will need to live with their parents longer in order to save enough to purchase a home.

“It’s never been stressful to buy a property. But especially so, when you combine that with where prices have gone in the last two years of the pandemic,” said Storey.


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