Buying a home remains out of reach for many families struggling to break into Canada’s booming housing market as home prices continue to soar alongside inflation and a higher cost of borrowing.
A recent report from Mortgage Professionals Canada (MPC) showed 29 per cent of respondents felt now was a good time to buy a home in their community — the lowest that figure has hit in the 12 years of the survey.
MPC’s survey captured impressions from more than 2,000 people, the vast majority of whom were already homeowners, however. The market outlook is even worse among the roughly one in five respondents who don’t own property: only three per cent said now was a good time to buy a home.
A slew of factors are coming together now to put homes out of reach. Average home prices rose 20.6 per cent year over year in February, according to stats released this week from the Canadian Real Estate Association (CREA).
Inflation levels, meanwhile, are at a more than 30-year high, Statistics Canada said Wednesday, putting particular pressure on consumers at the gas pump and the grocery store. The Bank of Canada began increasing its key interest rate target at the start of this month, a move that looks to tamp down surging inflation and calm the housing market but simultaneously raises the cost of borrowing and reduces house hunters’ buying power.
Though wages are also generally growing in Canada’s tight labour market, Kyle Dahms, economist with National Bank of Canada, says home price growth is “outpacing” compensation for most Canadians.
National Bank’s Housing Affordability Monitor at the end of last year showed the ability for Canadians to pay down their mortgages in major cities across the country deteriorated every quarter of 2021.
Though the first quarter of 2022 has yet to wrap, Dahms says rising interest rates, alongside other factors hitting Canadian pocketbooks, will not help prospective buyers like Ross. Canadian real estate, could see some relief with additional listings coming to market as owners look to “offload” properties to minimize mortgage payments or maximize returns.
A National Bank report showed new listings surged 23 per cent in February, though total inventory remains low at only 1.6 month’s supply. It’s too soon to say whether the growing stock will become a sustained trend, but a surge of new listings could ease competition and provide an entry point into the market for prospective buyers.