Canadian consumers are turning more bearish on the housing market, with home buying intentions slipping to their lowest level in years, according to a poll released by Royal Bank of Canada Tuesday.
Overall, the number of people across Canada who were “very likely” or “somewhat likely” to buy a home slipped by 5 percentage points to 23 per cent in January compared with last year, according to the poll conducted by Ipsos Reid. The number of poll respondents who said they were “very likely” to buy dropped from 9 per cent last year to 7 per cent in 2008, the lowest level since the poll was started 15 years ago.
“Considering the flurry of activity we've seen over the last few years, this year's results definitely signal a change,” said Catherine Adams, vice-president of home equity financing at Royal Bank.
The number of Canadians intending to buy a home within the next two years dropped across the country except in Quebec, where it increased to 21 per cent from 19 per cent.
When asked whether they were “very likely” to buy, Atlantic Canadians were the least interested at just 5 per cent. Markets where the greatest number of poll participants said they were “very likely” to buy a home were led by the Greater Toronto Area at 10 per cent, and Saskatchewan and Manitoba at 9 per cent.
Despite big price increases in the latter two markets, home prices in those provinces are still comparably cheaper than in many parts of the country. At a recent industry conference, Bank of Nova Scotia senior economist Adrienne Warren highlighted smaller cities including Regina and Winnipeg as potentially outperforming the overall market in 2008.
Saskatchewan and Manitoba were also the two provinces where poll participants were most likely to expect home prices to increase in 2008, at 65 per cent. Just 39 per cent of Alberta residents expect home prices to appreciate this year, the most bearish market in the poll.
Lack of affordability has caused a glut of supply in Calgary and Edmonton, tipping those markets back into buyers' territory. January resale home listings in Alberta rose by 45 per cent year-over-year, while unit sales dropped by 25 per cent, according to recent data from the Canadian Real Estate Association.
Overall, 56 per cent of those surveyed said they thought home prices would rise this year, down from 59 per cent in 2007.
At a recent industry conference, Brookfield Real Estate Services forecast a year-over-year increase in home prices of 3.5 per cent across Canada, compared with an 11 per cent year-over-year increase in 2007. Sales activity is expected to decline by 4 per cent from 2007.
Despite their more negative outlook, 85 per cent of poll respondents still believe purchasing a home is a good investment. That was down from 90 per cent in 2007, but higher than the 76 per cent 10 years ago.
Other findings included a continuing strong preference for detached homes over semis and townhouses, and for resale units over new ones. Condo units are gaining popularity with buyers over the age of 55. Those polled also indicated a strong desire to trade up to a larger home.
The poll of 3,023 Canadians was carried out by Ipsos Reid between Jan. 17 and Jan. 21, 2008, with results considered accurate to within plus or minus 1.8 percentage points 19 times out of 20.
© The Globe and Mail
