Photo: James Bombales
Home prices in Canada’s hottest housing markets remain well outside the budgets of many would-be buyers, according to a new survey.
More than one-third of buyers have concerns around buying a home, according to a poll by the Canada Mortgage and Housing Corporation (CMHC) released last week. The survey results were comprised of 4,000 recent mortgage consumers who had qualified for mortgages in the past year.
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“When compared to other factors such as type of neighbourhood, proximity to work and overall condition of the home, almost twice as many first-time buyers reported price/affordability as being the most important factor when buying a home,” reads the CMHC release.
Up to 85 percent of first-time buyers reported spending the most they could afford on their home, a sign that high home prices are squeezing the pockets of many Canadians.
Somewhat concerningly, only 52 percent of homebuyers reported being aware of a mortgage stress test which came into effect in January, and has made it difficult for many Canadians to qualify for a mortgage.
“About one in five first-time buyers indicated that the rules impacted their purchase decision with most opting to decrease non-essential expenses, purchase a less expensive home or use savings to increase their down payment,” reads the release.
Those concerned about housing affordability should brace for prices to continue to rise in the near future. The price of a Canadian home rose 2.2 percent last quarter to $625,499, a trend that is likely to continue into 2019, according to a recent pricing forecast from Royal LePage.
“Our expectation is that strong population growth in the GTA will fuel a continued rise in prices,” Phil Soper, president and CEO of Royal LePage, told Livabl. “New households are forming, and that’s putting pressure on the existing housing stock.”
Rising interest rates will also have a role to play. The Bank of Canada hiked the overnight rate to 1.50 percent in July, and is widely expected to do so again later this week, on the heels of the recently announced United States-Canada-Mexico Agreement.
“The trade tensions were preying on the confidence of the Bank of Canada,” said Soper. “The agreement frees the way for the BoC to bump interest levels up.”