CANADA
Homebuyers facing 'toughest time ever' to buy a home: economist
, BNN Bloomberg
Prospective home buyers are facing peak unaffordable market conditions amid elevated interest rates and high prices, says one economist.
Robert Hogue, assistant chief economist at RBC, said in a report Tuesday that Canadians are experiencing the “toughest time ever to afford a home.” The report said the Bank of Canada’s historic interest rate hiking campaign, which began in March 2022, continues to weigh on the nation's housing market despite more recent moves to hold interest rates. Specifically, Hogue said higher rates have greatly diminished purchasing budgets among house hunters.
“We estimate they’ve shrunk the maximum budget for a household with a median income ($85,400 at the end of 2023) by 22 per cent since the first quarter of 2022 to just under $500,000,” Hogue said adding that those figures assume a 20 per cent down payment and a 25-year amortization.
While higher interest rates have worked to erode the budgets of prospective homebuyers, the report outlined that prices have not drastically moved lower.
“Home prices, meanwhile, have fallen just 1.8 per cent over the same interval. It’s no wonder homebuyer demand has cooled so much. The ability of many Canadians to get into the housing market has greatly diminished,” he said.
As a result of the poor affordability conditions in Canada’s real estate market, Hogue highlighted that many buyers are waiting for rates to go down before getting off the sidelines.
However, the report highlights that Canadian homebuyers could see improving market conditions ahead.
“An improvement in affordability could in fact come sooner if long-term interest rates ease ahead of our central bank policy pivot and household income continues to grow at a solid clip. The outlook will brighten the deeper the Bank of Canada’s cuts get next year,” the report said.
While some improvements in affordability could “rekindle some buyers" enthusiasm,” Hogue said they will be small when compared to the “dramatic loss of affordability that occurred during the pandemic.”
“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025.,” the report said.
Interprovincial migration helps fuel tight Calgary housing market as inventory falls
The Canadian Press
The Calgary Real Estate Board says March home sales were up 9.9 per cent from last year as interprovincial migration to Alberta contributed to tight market conditions.
The board says 2,664 units changed hands last month, while the benchmark price across all home types was $597,600 for March — up 10.9 per cent from a year earlier and two per cent from February.
Relatively more affordable housing types, such as row and apartment-style homes, saw the most significant year-over-year price gains.
New listings fell 4.3 per cent to 3,172 and there were 2,532 units in inventory, 22 per cent lower than last year and half the levels traditionally seen in March. The board says inventory levels declined the most for homes priced below $500,000.
Ann-Marie Lurie, chief economist at CREB, says conditions for March have not been this tight since 2006, which also marked the last time Calgary experienced high levels of interprovincial migration.
Properties were on the market for an average of 20 days before selling in March, down 24.3 per cent from last year.
Trudeau pledges billions more for apartment construction loans
, Bloomberg
Prime Minister Justin Trudeau said the upcoming federal budget will put $15 billion (US$11.1 billion) more into an apartment construction loan program, the latest in his efforts to address Canada’s shortage of housing as its population surges.
The additional money would bring the size of the federal loan program to $55 billion, allowing it to finance the construction of more than 131,000 new apartments within the next decade, the government said.
The program will also be reformed to extend the loan terms, expand access for student and senior housing projects, and allow for multiple projects to be financed at once. The government said it will speed applications for “proven home builders.”
In effect, Trudeau is applying the BC Builds program across the country. That program, set up in the west coast province of British Columbia, provides low-cost financing to accelerate homebuilding and aims to shorten approval times for projects.
Trudeau has been making a series of announcements ahead of the budget’s release on April 16 in an attempt to show his government is addressing Canada’s soaring housing prices and lack of supply.
On Tuesday he announced a new $5 billion infrastructure fund that provinces could access — but only if they remove certain barriers to building housing, such as freezing municipal development charges and allowing up to four units on every lot
The Canadian Press , April 1, 2024.
REAL ESTATE
Mar 27, 2024
Mar 27, 2024
Young people paying 'astronomically high living expenses': insolvency trustee
, BNN Bloomberg
Following reports that younger Canadians are willing to make sacrifices to own a home, insolvency trustees say many should consider renting instead.
Rob Kilner, an insolvency trustee with Spergel, said in a news release on Wednesday that many younger Canadians should choose to rent. He said he sees a lot of “entitlement” among younger people as salaries have not kept pace with inflation and rising home prices amid higher interest rates.
“Someone will say ‘I deserve a house by myself.’ Well, sometimes you can’t afford a home by yourself. You might need a roommate,” he said.
“You now have a younger generation who are paying astronomically high living expenses. They are taking the beating the most. It’s almost like the older generation took up the ladder with them, and said ‘good luck climbing the wall.’”
In January, digital real estate platform Wahi released findings from its Homebuyer Intention Survey with results from 1,508 Angus Reid Forum members, finding that 24 per cent of Canadians between 18 and 34 indicated they are likely to buy a home this year. The survey found those individuals said they were willing to make sacrifices like reducing spending, working longer hours or taking a second job to purchase a home.
Samantha Galea, also an insolvency trustee at Spergel, said in a statement that she recommends people change their attitudes toward home ownership.
“People need to shift the idea that to be successful you have to own a home. It’s just not going to be in the cards for some people, and they’re in a worse position for trying to own a house,” she said.
Last week, a survey from Houseful, an RBC company, found that younger first-time home buyers were making compromises to get into the real estate market. Some of the trade-offs included looking for smaller and smaller homes, purchasing homes they may not stay in over the longer term and expanding their preferences on location.
The survey found that 65.2 per cent of younger first-time buyers would embrace a smaller space compared to 47.2 per cent of older buyers. Fewer younger buyers, 53.3 per cent, indicated they purchased their dream home, while 72.6 of older buyers indicated they did.
Additionally, younger buyers were also less likely to value location, with 28.3 per cent of younger buyers prioritizing this compared to 34.9 per cent of older buyers.
Generational wealth
As the cost of owning a home continues to rise in Canada, one economist says many may not be able to attain a primary driver of accumulating wealth.
Earlier in March, Carrie Freestone, an economist at RBC, said in a report that renters are facing barriers to building wealth as they are forced to allocate more of their income to shelter.
“I will say that if we look at wealth accumulation, homeownership has been the primary driver of wealth accumulation in Canada,” she said in an interview with BNN Bloomberg.
“It's accounted for half of the assets accumulated over the past three decades. So it is concerning that renters are not having access to the housing market.”
, BNN Bloomberg
Following reports that younger Canadians are willing to make sacrifices to own a home, insolvency trustees say many should consider renting instead.
Rob Kilner, an insolvency trustee with Spergel, said in a news release on Wednesday that many younger Canadians should choose to rent. He said he sees a lot of “entitlement” among younger people as salaries have not kept pace with inflation and rising home prices amid higher interest rates.
“Someone will say ‘I deserve a house by myself.’ Well, sometimes you can’t afford a home by yourself. You might need a roommate,” he said.
“You now have a younger generation who are paying astronomically high living expenses. They are taking the beating the most. It’s almost like the older generation took up the ladder with them, and said ‘good luck climbing the wall.’”
In January, digital real estate platform Wahi released findings from its Homebuyer Intention Survey with results from 1,508 Angus Reid Forum members, finding that 24 per cent of Canadians between 18 and 34 indicated they are likely to buy a home this year. The survey found those individuals said they were willing to make sacrifices like reducing spending, working longer hours or taking a second job to purchase a home.
Samantha Galea, also an insolvency trustee at Spergel, said in a statement that she recommends people change their attitudes toward home ownership.
“People need to shift the idea that to be successful you have to own a home. It’s just not going to be in the cards for some people, and they’re in a worse position for trying to own a house,” she said.
Last week, a survey from Houseful, an RBC company, found that younger first-time home buyers were making compromises to get into the real estate market. Some of the trade-offs included looking for smaller and smaller homes, purchasing homes they may not stay in over the longer term and expanding their preferences on location.
The survey found that 65.2 per cent of younger first-time buyers would embrace a smaller space compared to 47.2 per cent of older buyers. Fewer younger buyers, 53.3 per cent, indicated they purchased their dream home, while 72.6 of older buyers indicated they did.
Additionally, younger buyers were also less likely to value location, with 28.3 per cent of younger buyers prioritizing this compared to 34.9 per cent of older buyers.
Generational wealth
As the cost of owning a home continues to rise in Canada, one economist says many may not be able to attain a primary driver of accumulating wealth.
Earlier in March, Carrie Freestone, an economist at RBC, said in a report that renters are facing barriers to building wealth as they are forced to allocate more of their income to shelter.
“I will say that if we look at wealth accumulation, homeownership has been the primary driver of wealth accumulation in Canada,” she said in an interview with BNN Bloomberg.
“It's accounted for half of the assets accumulated over the past three decades. So it is concerning that renters are not having access to the housing market.”
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