High prices squashing Canadian would-be homeowners’ hopes, survey says

As people start spending again and interest rates rise, some of the housing market heat should disperse, says a report from Mortgage Professionals Canada.

thestar.com
Tess Kalinowski
March 16, 2022

Pandemic weary Canadians have never been more invested in their homes. But a report released by Mortgage Professionals Canada shows that soaring house prices are squelching their optimism about home ownership.

Only 29 per cent of 2,003 Canadians surveyed in January and February, said this was a good time to buy a home. That’s by far the lowest share in the survey’s 12-year history, said MPC CEO Paul Hunter. In 2017, the last time home prices peaked, 49 per cent expressed similar pessimism.

Ontario home prices are 22.5 times the average disposable income, notes the report, State of the Housing Market by global forecasting firm, Oxford Economics.

It predicts, however, that real estate will cool as the pandemic recedes and discretionary spending picks up and interest rates and inflation rise.

Taylor said he expects the housing market will return to pre-pandemic conditions. “People are ultimately going to want to live downtown again because restaurants and live music -- the culture that existed there before -- will continue,” he said.

“There will be some remote work, which will keep some of the values in the more rural places buoyed. But I wouldn’t be surprised to see a little bit of additional activity return to the very urban areas and a cooling in the (suburbs),” said Taylor.

The report says Canadians accumulated $184 billion in savings between the first quarters of 2020 and 2021. Much of that money has been poured into their homes.

Oxford Economics anticipates the Bank of Canada overnight rate will hit 1.25 per cent by the end of the year and there will be multiple increases through 2024. It says most Canadians can handle the impact to their mortgage from rate hikes.

“This will naturally weigh on mortgage rates as renewals come up, which could dampen demand for high-priced homes,” says the report.

The MPC survey found, however, that about 6 per cent of Canadians are already struggling with their mortgage payments and 23 per cent said they would have difficulty if their payments rose 10 per cent or less.

About 37 per cent of Canadian mortgage holders are expected to renew in the next two years and 51 per cent in the next two to five years. While 66 per cent hold fixed-rate loans, that number will climb as rates rise and variable rate mortgages move to the surety of a fixed loan, said Hunter. The number of variable mortgage holders has been growing, said the report -- up to 26 per cent this year, from 21 per cent last year.

While much of the pandemic housing demand has been based on increased savings and low borrowing rates, higher immigration levels are expected to feed the housing market going forward. The report notes that Canada’s population grew by .5 per cent in 2021 but is expected to expand by 1.2 per cent this year. The population of adults 65 and older will rise by 3 per cent.

Mortgage Professionals Canada represents about 15,000 individuals and 1,000 mortgage brokerages, lenders and insurers.

The 20-minute online survey of 2,003 Canadians was conducted on Jan. 26 and Feb. 7. It was comprised of 1,145 homeowners with a mortgage; 456 owners with no mortgage and 402 people who do not own a home.