Could buyer fatigue be setting in at last amid Canada's seemingly unsinkable housing market?
FP Posthaste, April 5, 2022

A poll this week by Scotiabank suggests so.

According to the survey, Canadians are less likely to buy a home now than they were at the height of the pandemic.

Worries about the rising cost of living, interest rate hikes, stock market volatility and economic uncertainty from the Russian, Ukraine war are all piling on to smother home-buying dreams.

Twice as many Canadians are putting their plans to buy a home on hold. Of those surveyed in 2022, 43% said they were shelving plans, compared with 33% in 2021 and 20% in 2020.

Especially among younger generations.

More than half of Canadians aged 18-34 say the current economic environment has hurt their finances, causing them to delay home ownership. Ninety per cent believe that home prices will keep going up over the next 12 months and 62% are waiting for them to come down before they buy a house.

Canadians have plenty to be exhausted about.

Over the past year housing affordability in this country has declined at an almost record pace. The only time it was worse was in 1990, says the latest RBC housing affordability measure.

According to RBC senior economist Robert Hogue, the outlook for affordability is grim.

"Rapid price escalation in the early months of 2022 has already raised the bar to impossible levels for many homebuyers," said Hogue in his report.

Bank of Canada interest rate hikes this year (RBC expects at least 150 basis points) will push homeownership costs even higher.

"Worst-ever affordability levels could well ensue, putting buyers in a precarious spot," wrote Hogue.

It now costs a household in Vancouver 73.9% of its income to own a home. In Toronto it's 68.6%.

And the sky-high prices Canadians are paying for homes means they are a lot more sensitive to rising interest rates than they were a decade ago.

A one percentage point rise in mortgage rates would boost payments by $315 a month for a standard $775,000 home in Canada, said Hogue, about double what the increase would have been 10 years ago.  

"While income gains will provide a partial offset, it's entirely possible RBC's measure could spike to all-time highs in the year ahead. A shock of this magnitude would severely stress homebuyers and exert significant downward pressure on demand," he wrote.

It's no surprise then that Scotiabank's poll found almost 60% of homeowners are choosing to stay put and renovate their place rather than buy a new one in 2022, up from 56% at the peak of the pandemic.

More Canadians too, 35%, are looking to move out of their city this year in order to get more housing for their money, compared with 29% last year.