Anticipation of rising house prices puts respondents on divergent paths to homeownership
Housing markets across Canada are sizzling as low borrowing costs and limited supply sends residential property prices to breathtaking extremes. That has created affordability challenges for many of the country’s first-time homebuyers – though not everyone is sitting on the sidelines.
In a BMO survey of first-time homebuyers conducted by Pollara Strategic Insights, only 32% indicated that it’s a good time to buy, with millennials least likely to be optimistic about buying in the current market climate (30%).
Sentiment was varied across provinces. While respondents in Alberta and the Prairies were optimistic about their markets (70% and 55%, respectively), pessimism was most prevalent among those in Ontario (with just 20% optimistic), B.C. (22%), and Quebec (22%).
“The Canadian housing market, overall, is incredibly strong right now with record demand and tighter supply pushing prices up," said Hassan Pirnia, head of Personal Lending and Home Financing Products at BMO.
At a national level, respondents said they expected to pay $433,000 on average for their first home. Estimates differed across provinces from a high of $586,000 among British Columbians to a low of $206,000 among those in Atlantic Canada.
The majority of survey participants (62%) also forecast even higher house prices as Canada turns the page on COVID-19. That view was most widely held by first-time homebuyers in the Prairies (73%) and Alberta (72%).
“While some buyers are looking to accelerate their move into the market anticipating price appreciation, we are seeing others pause on their homeownership plans,” Pirnia said.
With a healthy savings cushion built up over the course of the pandemic, 80% of first-time buyers said they intend to use at least some of that financial windfall on a down payment. That included 36% who plan to put down between 5% and 10% of the purchase price, nearly 20% who plan to put down between 16% and 20%, and almost 15% with a target down payment between 21% and 50%.
But based on forecasts of higher house prices, close to 40% of first-time homebuyers said they plan to wait for now.
With prices expected to increase, some first-time homebuyers plan on sitting on the sidelines. Close to 40 per cent said they plan to hold off on buying a home until prices come down, with millennials emerging as the group most likely to wait.
