Canadians see home ownership as key to financial health

Re/Max Canada report looks at the effects of interest rates, taxes and immigration on the housing market

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A new five-year outlook report for the Canadian housing market shows that many Canadians are concerned about affordability, despite continued confidence that real estate is a key driver of long-term wealth.

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“We’re really trying to release something that offers sober thought in a market that is red-hot and almost speculative given the recent price increases,” said Elton Ash, executive vice president at Re/Max Canada, which published the first publication. of a five-part series forming the outlook for five years.

The first report, released earlier this month, examines current market conditions emerging from the pandemic, while measuring Canadians’ attitudes to housing.

In collaboration with CIBC Capital Markets and the Conference Board of Canada, the report focused on three key areas: interest rates, taxes and immigration.

Ash notes that all three can have positive and negative effects on the market. One of the key insights from the first report is the findings of a survey of homebuyer concerns, with 50 percent of respondents worried about taxes affecting affordability. Also, 46 ​​percent were concerned about rising interest rates and 42 percent were concerned about an impending recession and its impact on property values.

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While rising rates can certainly affect affordability, as mortgage interest rates often anticipate or keep pace with the Bank of Canada’s interest rate decisions, Benjamin Tal, deputy chief economist for CIBC Capital Markets noted in the report that it has slowed the pace of the increases is that it matters.

Rising rates ultimately benefit the economy and, in turn, the housing market, as increases in borrowing costs help dampen higher-than-normal inflation — including home prices.

“The key information here is that the increases shouldn’t be big jumps, because they often lead to a recession,” Ash explains.

Moderate increases in borrowing costs, on the other hand, give Canadians a sense of stability rather than uncertainty.

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Real estate agent Lowell Martens says the report highlights concerns among Calgarians who have just weathered a multi-year recession and housing shortage that has quickly rectified itself.

“Calgary has been going through a five and a half year recession where we saw negative price growth,” says the real estate agent/owner of Re/Max Real Estate Mountain View.

“But now many are concerned about affordability as prices rise.”

Calgary Real Estate Board stats from April reveal unprecedented demand — bolstered by record-breaking resale in March — that has led to new price spikes. For example, in March, a home’s benchmark price was $518,600, up nearly 18 percent from the same month last year. As Martens adds, March 2021 was also a very strong period for sales.

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Demand is likely to remain strong despite higher borrowing costs due to immigration, the report notes, especially as the federal government plans to welcome more than 400,000 new arrivals annually for the foreseeable future.

The study further notes that these individuals will play a growing role in the market — accounting for 38 percent of buyers by 2021 — as they will now be able to buy homes in half the time of their historic average of seven. year.

Like other Canadians, newcomers mainly see opportunities, risks aside, in real estate. In fact, the report found that 61 percent of respondents agreed that real estate remains the best long-term investment.

“There are many benefits to investing your money in real estate,” agrees Martens.

Even if prices retreat, history has shown that investment will recover and grow. That’s not even considering that few assets have the utility of real estate: it’s an investment you can live in.

“So just because a property drops 15 percent in value doesn’t mean you’ve lost a bedroom from your home,” Martens says, allaying some buyers’ fears of a near-term price drop.

“It’s a long-term investment that will ultimately leave you richer.”

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