Near historic low interest rates introduced to keep the Canadian economy moving should be an incentive for first-time homebuyers to get into the housing market. Still, amid the pandemic many renters are deciding to stay put, with younger Canadians appearing to be more optimistic about buying a home now, a recent Scotiabank survey shows. One unforeseen positive of COVID-19 is that with more people working from home, some are being motivated to renovate their current living space.
According to the 2020 Scotiabank Housing Poll, only 38% of Canadians believe now is a good time to buy a new home. However, younger Canadians are more likely to take advantage of lower interest rates, with 18% of Canadians between the ages of 18 to 34 saying the pandemic has accelerated their plans to buy a home or investment property. More than three-quarters, or 77%, of renters said they have no plans to buy a home in the next year or two, despite low interest rates. The poll also found that COVID-19 has had a negative effect on the finances of about 20% of Canadians, who say they were forced to put plans to purchase a home on hold.
However, the Scotiabank poll also found that 32% of younger Canadians are waiting for prices to drop in the next six to 12 months before making a purchase. Albertans were significantly more optimistic, with 39% of prospective homebuyers believing housing prices will come down in the next 12 months.
“Customers appear to be mixed now, there are some that are very interested in purchasing a home at this time and other customers who are worried about what will happen with the second wave during COVID-19 and prefer to hold off in making any decisions on buying or selling a new home,” says Mary Adamidis, Home Financing Advisor, Scotiabank.
Housing in most of the key markets in Canada were operating with shrinking inventories before COVID-19 was declared a pandemic, with demand outpacing supply, supported by economic growth, low unemployment rate and population growth (largely due to immigration), according to a Statistics Canada report. That all changed in March as the contagion of the virus forced businesses across the country to temporarily close and lay off employees. Sales activities plummeted an average 70% from late March to April on a year-over-year basis in all major markets as the industry adjusted to new operating conditions. Home sales and prices across much of the country have since bounced back, with both hitting record highs in July. Sales rose a further 6.2% in August over July and the home price index rose 1.7%, according to the Canadian Real Estate Association.
The survey also revealed a rising trend in home renovations, driven by more people working from home and spending much of their leisure time there. About one quarter, or 26%, of Canadians plan to invest in improving their current house. More than 60% of Canadians own their own home.
When it comes to financing their plans, 68% of homeowners looking to buy a new property say they will use their savings, while 42% plan to use the equity from their primary home, 26% plan to take money from their investments and 12% said they would tap family and friends.
More than half of Canadians planning to renovate their homes are undecided on how they will finance the improvements. Only 12% of homeowners plan to use equity from their home, while 22% plan to take money out of their investments, 20% intend to use a personal line of credit and 3% said they would borrow from family or friends.
“Over the past few months, the Canadian housing market has been unpredictable. Still, from what we’ve seen, the lower interest rates that we are currently seeing can be a motivating factor for many Canadians who are making investments in their home, whether they’re looking to buy or renovate an existing property, says John Webster, Head of Real Estate and Secured Lending and Scotia Mortgage Authority at Scotiabank.
“It’s is a good time to explore the equity in your home and unlock its potential to meet those financial goals you may not have thought were possible with solutions like The Scotia Total Equity Plan (STEP).”
The poll, which was sent to a random sample of Canadians across the country, had a response rate of 1,509.