Two-thirds of Canadians still see themselves as future homeowners despite a housing market that continues to be plagued by high interest rates and unaffordable prices, according to a new report by NerdWallet Canada.
Their top four reasons for buying a home are that it’s a good investment (34 per cent), having more space (21 per cent), ability to pass the property down to their children or future children (20 per cent) and having monthly housing payments go towards equity instead of rent (19 per cent). Other reasons include saving for retirement (16 per cent) and establishing roots (14 per cent).
“Canadians should feel optimistic about purchasing a home, especially if they’re proactive in getting their finances in order before getting started,” Shannon Terrell, personal finance expert at NerdWallet Canada, said in the report. “That’s not to say optimism alone will clinch your dream home, but believing you can succeed will keep you going — and making prudent financial decisions — if the market does say ‘no.’”
Despite the optimism, many Canadians aren’t ready to start the homebuying journey quite yet. Only five per cent of the 1,012 adults surveyed by NerdWallet plan to buy a home this year and 43 per cent plan to purchase in the next five years.
Waiting may not be a bad idea since mortgage rates are expected to remain restrictively high in the months ahead. Bank of Canada governor Tiff Macklem on Feb. 7 said policymakers aren’t planning on cutting interest rates anytime soon and are prepared to raise them further if inflation persists.
The report advised homebuyers to use their purchasing timeline to inform their savings strategies for a down payment. For example, those who plan to wait a little longer to buy a home have more time to save money and build their credit score, although they may have to deal with higher home prices by the time they’re ready to buy.
The good news is that 76 per cent of Canadians who intend to purchase a home and use a down payment in the next five years have already started saving. The amount of savings varies, ranging from less than $5,000 (15 per cent) to more than $100,000 (20 per cent).
Still, that leaves 24 per cent who have not yet started saving for their planned future home and will likely be shut out of the market. Homeownership is currently out of reach for the 52 per cent who plan to use a down payment to buy within the next five years, but do not currently have $20,000 saved for it, according to the survey.
It’s not just non-homeowners who are struggling to acquire property as homeowners are facing many of the same obstacles. Indeed, 70 per cent of non-homeowners and 57 per cent of homeowners indicated that something is currently preventing them from buying a first or next home.
The barriers include high mortgage rates (27 per cent of non-homeowners versus 24 per cent of homeowners), lack of homes for sale in the areas they want to live in (13 per cent versus 12 per cent) and the current economic climate (25 per cent versus 21 per cent).