Confidence in housing market remains strong amid high interest rates
The housing market is down and interest rates are up — way up from a year ago. But more than half of Canadians still believe that real estate is one of the best investment bets around, says a study for Sotheby’s International Realty Canada.
It surveyed 2,000 Canadian adults between the ages of 18 and 77 in the Vancouver, Calgary, Toronto and Montreal Census Metropolitan Areas (CMAs) between January 3 and 10.
It shows that most Canadian city dwellers, including Torontonians, believe that the return on a home will match or outperform their other financial investments in a decade. Forty-nine per cent believe real estate will match or trump other investments within a year. Sixty per cent think it will perform at least as well as other vehicles over 10 years.
It found a high level of confidence in future real estate performance, with 60 per cent of respondents believing that a home or residential real estate purchase will perform the same or better than their other financial investments over the next 10 years.
While that figure reflects optimism about the market in the long term, the survey also found that almost half of respondents (49 per cent) believe that a home or residential real estate purchase will perform the same or better than their financial investments in the next 12 months. Nearly one in four (23 per cent) believe that it will do even better.
This despites the average price of a Toronto home declining nearly 18 per cent year-over-year in February to just under $1.1 million, according to the latest data from the Toronto Regional Real Estate Board. Back in February 2022 buyers were shelling out more than $1.3 million for the average Toronto home, prior to a series of interest rate hikes that pushed up the cost of borrowing.
“One of the most transformative and enduring social and economic outcomes of the pandemic is that Canadians now place a heightened importance on primary home ownership, not only as an investment in their lifestyle and personal security, but as an investment in their financial future,” Sotheby’s International Realty Canada President Don Kottick said in a news release. “Even though Canadians are now confronting the challenges of steep interest rate hikes, rising inflation, mounting economic uncertainty and significant housing affordability concerns, the results of the Mustel Group and Sotheby’s International Realty Canada survey reveal that confidence in our real estate market remains high, and that demand for housing and housing mobility across every generation is more pressing than ever.”
The survey also broke down generational attitudes towards real estate purchases.
It found that the COVID-19 pandemic has had the least influence on Generation X and Baby Boomers’ likelihood to buy or sell. Just over 40 per cent of respondents in that age group reported no change in their propensity to buy compared to January 2020 and roughly the same number reported no change in their likelihood to sell.
However Millennials are now less likely to sell their primary residence in the next five years compared to before the pandemic, with 32 per cent saying they are less likely to sell, compared to 21 per cent and 23 per cent amongst Generation X and Baby Boomers, respectively.
The report also found that while 36 per cent of Millennials are more likely to buy a home in the next five years compared to before the pandemic and 28 per cent report no change in likelihood, some 31 per cent of Millennials are now less likely to purchase a home.
It found 40 per cent of Generation Z adults are now more likely to buy a home in the next five years, while 33 per cent report no change in their home-buying propensity and some 33 per cent report that they are less likely to buy.
Overall, 35 per cent of respondents across all age groups said they are now more likely to buy a home in the next five years compared to January 2020, with 12 per cent now “much more likely” to buy.
The same number of respondents said they are now more likely to sell a home within the next five years, with 14 per cent now “much more likely” to sell.
In the Greater Toronto Area, the survey found “consumer confidence in Canada’s largest real estate market remains upbeat in both the short and the long-term, with a significant percentage of Toronto residents even more primed to engage in a real estate transaction than they were prior to the inception of the COVID-19 pandemic.”
The numbers in the GTA generally mirrored the findings from across the country.
“Even as sales activity and price escalation have calmed across Toronto as the region continues to absorb the effects of interest rate hikes and the pressures of dwindling housing supply, consumer demand for real estate has remained remarkably resilient,” the report said.
Figures released Wednesday showed that while home sales were down 40 per cent in February compared to a year ago, they did tick up 2.3 per cent compared to January, thanks to growth in sales in Toronto and Vancouver.
This article was reported by CP24.