Are Canadian sentiments toward homeownership shifting as prices fall?

Views in the value of property as a long-term investment remain solid, suggests survey

Are Canadian sentiments toward homeownership shifting as prices fall?

Canada’s housing market may be withstanding plenty of volatility in 2023 – and, in some regions, falling property values. But one constant throughout recent turbulent times appears to be Canadians’ conviction that housing remains a strong long-term investment, according to a new poll.

Despite softer prices across the country, 60% of respondents to RATESDOTCA and BNN Bloomberg’s latest survey indicated that they still viewed their home as part of their investment portfolio, with just over one in 10 (11%) of those surveyed no longer regarding their home as a solid long-term investment.

The survey, which polled 984 Canadian homeowners at the beginning of November, showed that a clear majority of Canadians remain optimistic about the potential of their property as an investment despite having been pummeled by a series of interest rate hikes throughout much of the previous two years.

Young Canadians remain bullish about merits of property investment

John Shmuel (pictured), of RATESDOTCA, told Canadian Mortgage Professional he hadn’t been surprised by the headline figure indicating strong support for property ownership as an investment – but said the revelation that younger people, far more than older people, viewed their home as being part of their investment strategy was an unexpected finding.

Seventy-two percent (72%) of respondents aged between 18 and 34 viewed their home as playing a role in their investment portfolio, the survey found, compared with 57% of those over the age of 35.

“My conjecture behind this is young people, especially if their parents owned a home, grew up hearing that home prices keep going up,” he said. “If you’re a young new immigrant coming to the country, you likely entered into this culture of home prices in Canada up and going up forever, and homes in Canada make a good investment.

“So I think young people have been especially saturated with this view. I was surprised that older people were less likely to view their homes as being part of their investment portfolio, especially because they are the overwhelming beneficiaries of that 30-plus-year bull market of housing prices going up in Canada.”

While the reasons for that disparity weren’t revealed in the survey, Shmuel said it could have arisen from the possibility that more older Canadians who have been the beneficiary of a long-term surging market have fully paid off their homes and seen them rise in value.

“You’re probably at the same time able to save money and make investments in stocks, and not having the stress of watching your home go down in value and worry about whether the money you sunk into it is a good investment,” he said.

“You almost have to be on the side of home prices going up if you’ve bought a home and more recently watched it going down in value, because you’ve probably also sunk a larger chunk of your net worth into that home as a down payment.”

Current market cooldown viewed as a blip rather than a long-term trend

With a sizeable percentage of respondents indicating that recent drops in home prices had in fact strengthened their view that homeownership is a good investment, Shmuel said the recent market downturn did not appear to have had a significant negative effect in hardening attitudes against the idea of buying a home.

“I think it goes to show that longtime beneficiaries of this housing market are not being shaken by this decline in home prices,” he said. “They view this as a blip.

“They’ve probably either been through a blip before, whether the 2017 housing price decline or the early 1990s GTA [Greater Toronto Area] price decline, or they’ve been a beneficiary of such long-term upward price momentum where even a serious decline like we’re seeing now is not probably going to shake their financial position.”

Revisiting that sentiment in a year or two, if home prices continue to decline, would be an interesting endeavour, according to Shmuel. Still, the evidence remains weighted in favour of the idea that Canada is a strong place to own a property – irrespective of the recent slide in home values.

“We have a very highly educated workforce here in the country. We are an ongoing source [for] immigrants joining the country bringing their skill sets and knowledge. We’re blessed with abundant resources. We’re a functional democracy in a world where democracy is retreating,” Shmuel said.

“I think long-term, Canada still has extremely positive prospects and corrections aside in the housing market here, our cities continue to make the most livable cities in the world. This is still a very good country to be in.”

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