‘Colossally high’ number of Canadians plan to buy a home within a year. Why?

With Canada’s housing market “starting to turn a corner,” there is growing demand for homeownership with a “colossally high” number of people planning to buy a home within the next year, according to a new poll.

Almost half (49 per cent) of the people surveyed by NerdWallet last month said that they plan to purchase a home in the next five years. That percentage is up from a year ago when 43 per cent expressed the same intent.

Over the next 12 months, about one in 10 (11 per cent) or 4.4 million Canadians plan to buy a home, which is a still a “colossally high number” given that the greatest number of homes sold in a single year was less than 700,000, said Clay Jarvis, NerdWallet’s mortgage and real estate expert in Canada, in a report Wednesday analyzing the survey results.

“People are actually even more eager to own their own homes despite high interest rates, despite low supply,” Jarvis told Global News in an interview Thursday.

The survey of 1,015 Canadian adults was conducted online by The Harris Poll, Jan. 17-19, 2024. The poll did not specify whether it was prospective first-time homebuyers or current homeowners who were surveyed.

Concerns about job losses, inflation and recession don’t seem to be really impacting Canadians’ desire to own their own homes, Jarvis said.

“People aren’t really focused on macro and economic factors, but when it comes to things like prices and especially interest rates, that’s usually what triggers demand,” he added.

2:47 Canada’s housing market starting to turn a corner, CREA data shows

Home sales over the last two months are pointing towards “signs of recovery,” according to the Canadian Real Estate Association.

A report by CREA published last week showed that national home sales increased by 3.7 per cent in January relative to December 2023.

Home ownership is a priority for 72 per cent of Canadians, the NerdWallet poll suggested.

While the main motivating factor for owning a home is for financial reasons, it is also a lifestyle decision.

Almost 40 per cent think it’s a good investment, 23 per cent say it helps them build equity instead of paying rent to a landlord, and 13 per cent prioritize home buying to help save for retirement.

For roughly a quarter (24 per cent), it’s about having more space and almost the same proportion (23 per cent) of people say a home is something they can pass on to their children.

Establishing roots (16 per cent) is also a motivation for home buying and 15 per cent say they want to own a house so they don’t have to deal with a landlord anymore.

In January, the Aggregate MLS Home Price Index fell by 1.2 per cent month-over-month, but was still up slightly by 0.4 per cent compared with a year ago, the CREA report published on Feb. 14 said.

Recent price decreases were mostly seen in Ontario and to a lesser extent, in British Columbia. In Alberta and Newfoundland and Labrador, prices were continuing to climb last month, but they are mostly holding steady in other parts of country.

Interest rates, which hit a 22-year high in 2023, will heavily impact demand this year, with Canadians pinning hopes on rate cuts, Jarvis said.

0:44 Tiff Macklem expects housing will rebound but with ‘considerable uncertainty’ in prices

The Bank of Canada has kept its benchmark interest rate at 5.0 per cent since July 2023, holding it steady in its last four consecutive decisions.

The central bank has remained mum on a possible timeline for rate cuts, but some economists expect that interest rates could start declining as early as spring this year.

“I think it’s going to be interest rates that really tell the story for the rest of 2024,” Jarvis said.

Tweet This Click to share quote on Twitter: "I think it's going to be interest rates that really tell the story for the rest of 2024," Jarvis said.

“If they stay comfortably below 5.0 per cent, I do believe that we’re going to have a pretty busy spring market. If they climb back over 5.0 per cent, I think we’ll see demand taper off.”

A majority of prospective homebuyers (76 per cent) who plan to purchase in the next five years said they intend to use a down payment, the NerdWallet poll said.

However, 60 per cent say they have started saving for that — a drop from 76 per cent from a year ago.

Jarvis said the more buyers pay upfront, the greater flexibility they have as homeowners. It also makes it easier to get past the mortgage stress test.

“The bigger your down payment, the smaller your mortgage is going to be,” he said.

“You’re going to pay less in interest and you’re going to be free of your mortgage sooner, so it just makes good economic sense to put down as much as you can.”

— with files from Global News’ Craig Lord