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Canadian homebuyer expectations

The Latest in Mortgage News: Canadians Divided Over Home Price Expectations

Following a record year of home price increases, Canadians remain divided over where they expect (and hope) prices will go from here.

A new survey from Angus Reid shows a nearly even split among those who want to see home price increases continue, and those who would prefer to see prices retreat.

“High housing prices have divided Canadians into three groups: the haves (40%), who want the boom to continue lifting their assets, the have-nots (39%), who hope for the market to tank so they can get in, and the status quo (21%) who don’t mind prices staying right where they are,” the Angus Reid report reads.

Digging deeper into the findings, more than one in five (22%) would be happy to see prices fall by 30% or more, with another 17% who would like to see prices fall around 10%.

On the other end, 14% would like prices to rise another 30%, while about a quarter (26%) are hoping for a more moderate rise of 10%. As mentioned above, 21% would like prices to remain where they are.

In its recent forecast for 2022, the Canadian Real Estate Association said it expects prices to grow 7.6%. That follows an anticipated annual growth rate in 2021 of over 20%.

With interest rates on the horizon this year, Angus Reid also asked respondents how a hypothetical two-percentage-point rate increase in mortgage rates over the next 12 months would impact their finances. Just over one in five (22%) said it would have a “major negative impact” on their finances. Another 31% said it would cause a “minor negative” impact, while 24% were unsure.

Current market expectations are for the Bank of Canada to hike interest rates four or five times, which could translate into a 100- to 125-basis point increase in variable mortgage rates. There are 100 basis points in a percentage point.

Ontario’s Housing Task Force to Unveil Recommendations in Early 2022

The Housing Affordability Task Force appointed by Doug Ford’s Ontario government late last year is expected to report back with recommendations early this year.

The nine-member panel was given a mandate to examine the province’s deteriorating housing supply and affordability situation and advise on potential solutions. The government noted those measures could include increasing supply, reducing red tape and accelerating timelines.

Last month the government named the nine members who will serve on the panel. They include:

  • Jake Lawrence, Chief Executive Officer and Group Head, Global Banking and Markets, Scotiabank (chair of the Task Force)
  • Lalit Aggarwal, President, Manor Park Management
  • David Amborski, Professional Urban Planner and Professor, Ryerson University’s School of Urban and Regional Planning
  • Julie Di Lorenzo, President, Diamante Urban Corp.
  • Andrew Garrett, Senior Principal, Real Estate, Investment Management Corporation of Ontario
  • Tim Hudak, Chief Executive Officer of the Ontario Real Estate Association
  • Justin Marchand, Chief Executive Officer of Ontario Aboriginal Housing Services
  • Ene Underwood, Chief Executive Officer of the Habitat for Humanity Greater Toronto Area
  • David Wilkes, President and Chief Executive Officer of the Building Industry and Land Development Association

 

RBC’s Housing Affordability Measure Reaches Worst Level in 31 Years

Rising home prices and higher mortgage rates have erased the improvements in housing affordability that were seen during the pandemic.

RBC reported that its aggregate measure of affordability jumped two percentage points to 47.5% in the third quarter, reaching its worst level in 31 years. That follows a 2.7-percentage point increase in the second quarter.

“After a wild roller-coaster ride in 2020, it’s now all about intense market heat,” wrote the report’s author, RBC economist Robert Hogue. “Homebuyer demand is supercharged and inventories are near historical lows in virtually every market, creating intense competition between buyers and pressured prices up. These conditions have widely eroded housing affordability in the past year.”

He noted that some of the highest-priced markets, including the Greater Toronto Area, experienced greater erosion in affordability, which is likely to keep driving buyers to more affordable regions.

According to RBC, the future for affordability doesn’t look good so long as housing supply is slow to come online. “We estimate rising interest rates alone could drive up our national affordability measure another 2.0 to 3.5 percentage points over the coming year,” Hogue noted. “A further 5% increase in home prices would add an extra 2.0 percentage points.”

 

RBC Housing Affordability