Renters remain undaunted as they plan their homebuying move

The homeownership market has its challenges, but that’s not deterring prospective buyers from carefully planning their move – and Ontarians are among the most hopeful, according to Royal LePage.

According to a recent Royal LePage survey, conducted by Hill & Knowlton, 27 per cent of Canadians who currently rent their home say they plan to purchase a property in the next two years. Among those aged 18 to 34, that figure jumps to 40 per cent. Meanwhile, 69 per cent of renters say they do not plan to buy a home in the near future. Among them, more than half (54 per cent) do not feel their income will be sufficient to afford a property in the area where they wish to live (61 per cent among respondents aged 18 to 34).

“The rental sector is not immune to the significant affordability challenges stemming from Canada’s acute housing shortage,” says Phil Soper, president and chief executive officer, Royal LePage. “High mortgage rates have made it difficult for many to purchase a home, forcing some to move into, or remain longer than planned, in the rental market.”

Worthwhile long-term investment

Of renters who say they plan to buy within the next two years, half (50 per cent) say they will have a down payment of less than 20 per cent. Twenty-six per cent say they will put 20 per cent down, while 15 per cent say they will have a down payment of more than 20 per cent. In Canada, mortgage insurance is required for homes purchased with less than 20 per cent down.

Forty-four per cent of renters planning to purchase in the next two years believe they will be able to afford a home in their current city of residence, while 37 per cent do not. Among those who don’t believe they can buy in their current location, 40 per cent say they will have to travel more than 50 kms to buy within their budget, while 21 per cent believe they will have to search for a property within a 31- to 50-km radius, and 18 per cent say they would need to look within a 16- to 30-km radius.

“We know that Canadians widely consider homeownership a worthwhile long-term investment and a quintessential part of the Canadian dream,” says Soper. “So much so, that many are willing to relocate in order to make their homeownership dreams a reality. This is especially true for young Canadians and those who have remote work flexibility.”

When asked about the motivating factors behind their decision to continue renting rather than buy, approximately one third of respondents said they were waiting for interest rates (33 per cent) and property prices (30 per cent) to decrease. Twenty-two per cent said they are continuing to rent while saving for a down payment.

“(In June), the Bank of Canada announced its first rate cut in more than four years,” adds Soper. “Falling borrowing costs will lower the threshold to qualify for a mortgage, helping renters become owners. However, this creates a double-edged sword. Increased competition as they enter the market will put additional pressure on property values. While some will wait for home prices to become more reasonable, Canada’s housing shortage will leave them waiting indefinitely.”

Ontario Highlights

In Ontario, 30 per cent of renters say they considered buying a property rather than renting before signing or renewing their lease. Among them, 47 per cent say saving for a sufficient down payment led to their decision to rent instead. Twenty-eight per cent say they are waiting for property prices to decline, while 26 per cent are holding off for interest rates to decrease.

Looking ahead, 31 per cent say they plan to purchase a property in the next two years. Of those planning to purchase, 43 per cent believe they will be able to afford to buy a property in their current city of residence.

Across Canada, only respondents in Manitoba and Saskatchewan, at 36 per cent, were more positive about buying a home in the next two years than Ontarians. This compares to 27 per cent for prospective buyers in both BC and Alberta.