Resurging confidence in the economy and employment is boosting homebuying intentions among Canadians to the highest levels since 2010, despite the Federal Government’s new uninsured mortgage “stress test.” In fact, one-third of Canadians (32 per cent) are very or somewhat likely to buy a home in the next two years, up seven percentage points from last year. Millennials (ages 18-34) express the strongest of those homebuying intentions (50 per cent), according to the annual RBC Home Ownership Poll.
Four-in-10 (39 per cent) Canadians are aware of the latest Stress Test Guidelines issued by the Office of the Superintendant of Financial Institutions (OSFI) for uninsured mortgages, and over half (55 per cent) indicate that the guidelines are impacting their purchase decisions. This includes making higher down payments (25 per cent), delaying home purchases (19 per cent) or buying a less expensive, smaller home or a less expensive one in a different location (18 per cent respectively). As intention to buy continues to climb in Canada, just over one one-third (35 per cent) of Canadians indicated they had received/would be receiving financial assistance from their family for a down payment, while almost an equal number (36 per cent) plan to do it on their own with a dedicated savings account.
“Canadians continue to feel optimistic about getting into the housing market despite changes in government regulations. They’re taking a more informed journey to home ownership by starting with affordability,” says Nicole Wells, Vice-President, Home Equity Financing, RBC. “With the right tools and a detailed roadmap that navigates the journey, Canadians are better prepared to make one of the biggest decisions – and it’s based on facts, not emotions.”
Biggest challenge: Finding the right property
The top two homebuying challenges buyers face are: choosing the right property (32 per cent) and deciding how much they can afford (21 per cent). The journey to home ownership begins online, and home owners revealed they spent an average of five weeks searching online for their current home. In fact, nearly one-in-10 Millennials said they would purchase a home without ever physically seeing it. Overall, Canadians value being able to “visit” virtually, with almost half (49 per cent) saying they looked at photos/videos of prospective homes online. Finally, to help determine costs and affordability, 39 per cent of home owners took valuations of neighbouring homes into account, and 36 per cent used affordability calculators.
Millennials are feeling more confident about jobs, economy – and home purchase intentions
Compared to 2017, more millennials (18-34) believe that a home purchase is a good investment – in fact, 84 per cent responded it’s a “very good or good investment” (vs. 79 per cent in 2017). Millennials are also feeling less anxiety about employment (36 per cent vs. 47 per cent in 2017) and less uncertainty about the economy (19 per cent vs. 28 per cent in 2017). This age group is now also reporting an increased likelihood (11 per cent) of buying a home within the next two years.
Interest rates driving homebuying intentions
Over half (61 per cent) of Canadians are very or somewhat concerned about interest rate increases – a jump of almost 10 per cent from last year. Over one-third (35 per cent) are thinking about buying a home sooner because of current low interest rates, while another one-third (32 per cent) were also thinking of doing so because of a potential increase in interest rates.
“Rate is only part of the equation, and online tools such as affordability calculators, virtual home tours and neighbourhood finders, can help make all of the homebuying planning easier,” adds Wells. “It’s one of the few times we recommend Canadians look into a crystal ball, but it’s important to budget for both the present and possible future scenarios. That means considering what five or 10 years out could look like – children, owning a business or even downsizing. Online tools can help you paint a better understanding of your financial picture and create a realistic wish list that aligns with your budget and needs,” adds Wells.
RBC Royal Bank® offers the following tips for homebuying success:
Scenario planning: While no one can tell what the future may bring, it’s important to test drive some of your near term plans with homeownership. If you plan to have children in the future, buy a new car or own a business, make sure you have a few scenarios aligned with your dreams. Factor these scenarios into your homebuying aspirations.
Do your own stress test: While optimism about the job market and the economy has increased, it can also lead us to feel overly optimistic about what we can afford. Do your own stress test when determining affordability by testing what will happen if interest rates go up, or your income goes down.
Use online tools: With the variety of tools available, homebuyers today can make much more informed decisions than they could in the past. From online mortgage pre-approvals to neighbourhood analysis, important information is right at your fingertips before your house hunt even begins.
Future proof your financial life: Your home is more than just a place to live. It is a big investment that can impact your plans to retire, your ability to afford an education for your child or make things tight on a monthly basis. Whether you’re buying your first home or helping your children buy their first home, it’s important to meet with an expert to get a better idea of what impact that will have on your long term savings plan.