Survey reveals that more Canadians are putting off homeownership plans
Canadians are hitting the brakes on buying a home or condo as rising costs, and strict mortgage rules make it increasingly difficult to enter the housing market.
Despite recent interest rate cuts, both prospective buyers and homebuilders are expressing a lack of confidence in the current conditions, calling for urgent changes to improve affordability.
A new survey from Royal LePage reveals that younger Canadians are putting off their plans to purchase homes or condos. This hesitancy is mirrored by homebuilders, who are also struggling to sell properties under current market conditions.
In a separate report, the Canadian Home Builders' Association (CHBA) said the Bank of Canada’s recent rate cuts have done little to alleviate the financial strain on buyers.
Kevin Lee, CEO of the CHBA, pointed out that while interest rates are slowly declining, the restrictive mortgage rules are still a major barrier for many Canadians.
"[The] slowly dropping interest rate environment is not enough to counter the restrictive mortgage rules, contributing to buyers' inability to enter the market with today's house prices," Lee said.
"If buyers can't get better access to mortgages, and municipalities don't lower development taxes and address the barriers to homebuilding, the chronic undersupply of homes will only get worse in many areas of the country, which will drive up house prices again."
The CHBA’s latest housing market index, which surveys hundreds of builders and developers across the country, showed a steep drop in confidence. For single-family homes, the index fell to 29.9 out of 100 in the second quarter of 2024, down from 34.9 in the previous quarter and 39.9 a year earlier. The multifamily housing market is facing similar challenges, with its index dropping to 32.5.
Royal LePage CEO Phil Soper said that despite a slight drop in borrowing costs, the ongoing shortage of housing supply has kept prices high, further discouraging buyers.
"Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates," Soper noted.
The Bank of Canada has cut its overnight lending rate twice this year, most recently reducing it to 4.5% in July. However, these cuts have yet to significantly impact the housing market, where the average home price remains stubbornly high.
According to Royal LePage, the average price of a home in Canada was $824,300 in the second quarter of 2024, up 1.9% from the previous year.
Amid these challenges, the CHBA is calling for further easing of mortgage restrictions to help potential buyers. While recent federal measures allowing first-time buyers to extend their mortgage amortization to 30 years have been a step in the right direction, Lee argued that more needs to be done.
He suggested lowering the stress test requirements and adjusting the criteria to reflect the current high-interest environment.
Source CMP
By Candyd Mendoza
