RBC poll reveals significant optimism among prospective entrants to the housing market
Hopeful first-time homebuyers have faced a notoriously difficult task in qualifying to purchase a property in Canada in recent years – but could their prospects be improving?
RBC’s recently released Home Ownership Poll for 2023 was notable for the optimistic outlook on display among so-called “pre-first-time homebuyers,” those Canadians who are not currently in a position to buy but hope to be so in the foreseeable future.
That survey, conducted with Leger, said that 78% of pre-first-time buyers will soon be in a better position to buy a home than previous years, with 68% buoyed by the prospect of being able to afford due to lower home prices and nearly two in three (65%) expressing optimism about the housing market over the next 12 months.
Nick Palucci, senior director of acquisition and distribution of home equity finance at RBC, told Canadian Mortgage Professional that the positive outlook among would-be buyers was one of the most noteworthy takeaways from the study.
“Where we see an opportunity for sure is on the pre-first-time homebuyer [side], where people aren’t in the market yet, they haven’t bought a home yet, but they’re planning or saving towards one,” he said.
“With the decrease in prices that we’ve seen pretty well in every market across the country, they really see this as an opportunity for them to get into the market where maybe they haven’t had a chance for many years.”
Canada’s banking regulator, the OSFI, has warned that the mortgage payment extensions currently offered to borrowers in the country are short-term solutions that will leave them in debt for longer periods.https://t.co/yusDsq8Ofg
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 17, 2023
Low prices unlikely to stick around forever
Still, time to take advantage of lower prices may be significantly limited. Thirty-one percent (31%) of respondents believe only a small window of time exists to make a purchase in that environment, while 42% said potential price growth is limitless when it begins gathering pace again.
“The other caveat to [pre-first homebuyer optimism] would be that the other sentiments for the poll [show] that Canadians don’t believe these lower prices will last forever and so there’s probably a short life on that and things will change,” Palucci said, “maybe not to the same growth extent that we had in 2020, 2021, but definitely that prices will start to change.”
Overall confidence in real estate as a solid investment remains strong, according to the poll, perhaps bolstered by the swing away from a seller’s market. In 2022, 71% of survey respondents described market conditions as favouring sellers, but that share plummeted to 37% in this year’s report.
However, economic storm clouds on the horizon continue to loom large in the minds of many Canadians, with fully 75% of respondents indicating their worry about the potential of an upcoming recession as forecast by many observers.
“What we’re seeing, and what we’ve seen through the poll, is that Canadians still believe that real estate’s a good investment, but [we’re] definitely moving much more toward a balanced market, regardless of where you are across the country,” Palucci said.
The fading perception of the current housing market as favouring sellers, he added, “puts the market more stable than we’ve seen over the past couple of years.
“But definitely the other sentiment I would say that jumps out in the poll is the Canadian sentiment around the uncertainty in the market, just not knowing where things are going to go… of course, depending on where you are in the country, and then also the affordability concerns with the increase in rates that we’ve seen over the past year, but other goods and services and things that are on their mind [too].”
What should buyers keep in mind in complex economic times?
Palucci emphasized the importance for consumers of speaking with professional realtors and mortgage specialists to walk through their own personal financial situation and receive tailored advice on whether a home purchase makes sense in the current unpredictable environment.
“It really differs by individuals, by their family needs, so I think trying to time the market is a mistake,” he said, “but really base it on what folks need from a home perspective, also trying to see what lines up to their finances and get into detail on the finances and understand their cash flow.
“And I think that’ll help alleviate or reinforce whatever on the affordability concerns that they have when they really understand where their money’s going and also how much it actually costs to not only pay a mortgage, but also service the home and maintain a home and make sure you’re factoring all those things in.”
Still, despite the current headwinds, Palucci said real estate remained an effective way for Canadians to invest their money, as borne out by the survey results.
“In a nutshell, I think there’s optimism… but there’s also that concern around the uncertainty and the affordability,” he said. “But also again, just purchasing a home is a good investment, and [Canadians] feel there’s sort of this window of time to get in.”
