Followed by lack of affordable housing options and high rents
Although inflation has forced the Bank of Canada to hike interest rates, dampening housing demand and bringing down home prices in the process, the higher cost of living is weighing on prospective homebuyers in other ways.
“How inflation is really affecting homeownership is the squeeze on people’s income and (their ability to put) food on the table,” Elton Ash, executive vice-president of Re/Max Canada, said in an interview. “Thankfully, in some instances, gas prices have come down, but it’s the overall cost of living that is really affecting Canadian attitudes. How can they afford housing given all those pressures and salary levels not maintaining the pace with inflation? And so there’s this squeeze on all Canadian wallets right now.”
Re/Max Canada’s 2023 Industry Trends Report found 34 per cent of Canadians who planned to enter the market listed rising costs and inflation as their top concern, followed by a lack of affordable housing options in their community (25 per cent) and high rents (25 per cent).
The poll also found that 66 per cent of Canadians believe addressing the affordable housing and supply crisis should be among the top priorities for governments across the country and 41 per cent think removing zoning and development red tape is needed to improve supply.
Successfully navigating the market during inflationary times means “forgetting the noise and looking at your own personal situation,” Tim Hill, real estate adviser at Re/Max All Points Realty said in the report.
“Make a real estate decision based on how it will benefit you and your family. If it makes sense, go for it. If not, don’t follow the herd,” Hill said.
While the market awaits sustainable, long-term solutions that will improve inventory levels and ultimately, affordability across the country, sellers are being told to stay flexible.
“I advise that their property is priced and marketed according to current market conditions; and when reviewing sold comparables, be open to adjustments,” Akash Bedi, broker and owner, Re/Max Executives Realty, Winnipeg said in the report.
The highly anticipated spring season should provide a better sense of where buyers and sellers stand.
Bank of Montreal senior economist Sal Guatieri is betting it is sellers who will prove they are willing to be more flexible.
“Heading into the important spring season, we’ll see who is more eager to make a deal, sellers or buyers; our betting is on the former given still-poor affordability,” Guatieri said in a note to clients.
In addition to inflation, RE/MAX anticipates high interest rates, the mortgage stress test, low inventory and an influx of immigrants will be the major forces that shape real estate markets in 2023.
Re/Max said 1,554 Canadians were surveyed by Leger for the poll cited in the report. The survey was completed between Jan. 20 and 22, 2023, using Leger’s online panel, which has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.
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