Survey shows buyers may postpone home purchase plans

Prospective homebuyers are entering 2018 confident and eager to purchase, but rising interest rates and home prices could postpone those home purchase plans, according to a new survey by Canada Mortgage and Housing Corp. (CMHC).

The first-ever 2018 Prospective Home Buyers Survey compares the intentions, attitudes and awareness of housing expectations, readiness to buy, affordability and impact of changes to the housing industry among three segments of people: First-time buyers, previous owners and current owners.

While the majority of the survey’s 2,507 respondents agree homeownership is a good long-term financial investment, 76 per cent of first-time buyers, 73 per cent of previous owners and 63 per cent of current owners say they would delay their purchase due to steep increases in home prices.

Interestingly, it’s not concerns about interest rate increases or stricter mortgage regulations motivating first-timers and previous owners to buy – the desire to stop renting is cited by those groups as one of the top three drivers to purchase a home.

The survey was conducted among prospective buyers who plan to purchase a home within the next two years, yet only one-third of respondents say they’ve prepared a detailed budget, six months to a year before a home purchase.

When it comes to home prices and affordability, the majority of those surveyed agree they have a good understanding of how much mortgage they can afford. Unsurprisingly, current owners were the most confident at 83 per cent, followed by previous owners at 79 per cent and first-time buyers at 69 per cent. In a similar vein, only 66 per cent of first-time buyers say they have a good understanding of the full cost of homeownership (including mortgage payments, property taxes, condo fees, utility and maintenance costs) compared to 85 per cent of current owners and 79 per cent of previous owners. All three groups agreed they will take extra steps to pay down their mortgage as soon as possible.

While the majority of prospective homebuyers are confident in their ability to find a suitable home they can afford, that level of confidence is markedly higher among current owners (83 per cent) than first-time buyers (68 per cent).

Despite being confident about affordability, only 36 per cent of first-time buyers surveyed were aware of the federal government’s mortgage qualification rule changes made in 2016, compared to a little more than half of current owners and previous owners.

Among those not previously aware of the mortgage qualification rule changes, 20 per cent of first-time buyers say this change will affect their decision to purchase in some way, compared to 14 per cent of current owners.

Given their relative unfamiliarity with mortgage qualification rules, it’s unsurprising the vast majority of buyers from all three groups – including 80 per cent of first-time buyers – plan to consult a mortgage broker before purchasing a home.