New survey highlights economic factors affecting homebuyers' decisions
Over 70% of Canadians looking to buy their first home are postponing their purchase in anticipation of lower interest rates.
This is according to a new survey from BMO, which sought to highlight rising concerns over the cost of living, inflation, and financial stability as major factors influencing potential buyers’ decision.
The findings underscored lingering anxieties surrounding the affordability of homeownership, with 58% of respondents worried about living expenses and 56% about inflation. Additionally, 38% expressed unease about their overall financial situation.
Amid these concerns, the Bank of Canada has chosen to leave interest rates unchanged this month, with governor Tiff Macklem stating that they want to be “confident that progress toward price stability will be sustained.”
Still, notes from the Bank’s April 10 meeting did indicate the potential for gradual rate cuts by mid-year.
Robert Kavcic, senior economist at BMO Capital Markets, said expectations of rate cuts in the second half of the year should help “pull some demand off the sideline and firm up housing activity.” But he also noted that interest rates “have a long way to fall” before housing affordability returns to “recent norms.”
Homeownership remains an important goal for most Canadians
Despite prevailing financial anxieties, the BMO Real Financial Progress Index found that 85% of Canadians still feel they are making real financial progress and 67% are still confident in their current financial status.
BMO has been releasing its Real Financial Progress Index since 2021. Its latest findings were gathered from a poll conducted from February 28 to March 18.
This survey also found that 62% continue to see homeownership as a critical life goal, although 56% of potential buyers view it as currently unattainable.
Moreover, 41% said rising insurance costs may affect their ability to maintain or buy a home.
Among those planning to buy homes soon, only 13% said they are looking to make a purchase in 2024, while more than a quarter (26%) plan to buy in 2025 or later.
As for current homeowners who want to refinance their homes, nearly three quarters (74%) said they want to wait until mortgage drops before pushing through with their plans.
Climate change also came out as a significant factor in homebuying decisions, particularly among younger generations.
According to the survey, 39% of respondents believe environmental factors like wildfires and floods will have an affect on their future living arrangements, with this figure skewing higher among Gen Z (54%) and Millennials (49%).
Gen Z, Millennials turn to family for financial help
The BMO survey offered additional insight on how younger generations are approaching homeownership.
It found that 70% of Millennials and 68% of Gen Z still see homeownership as a major life goal, though many do not anticipate to achieve it until 2025 or later.
Furthermore, 52% of Gen Z and 31% Millennials said they expect to rely on financial support from their parents and/or grandparents. A smaller portion of both groups also voiced plans to turn to family members for support towards a downpayment for a home.
At the same time, Millennial parents were found to be the most likely to provide financial support to their children, with 33% saying they intend to help their children with their home purchase by providing a cash contribution (23%) or helping with their FHSA (10%).
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