Recent declines in housing prices are prompting a reconsideration of the role homes play in Canadians' investment strategies, according to the latest survey conducted by BNN Bloomberg and RATESDOTCA in collaboration with Leger. The findings reveal that while the majority of Canadians still perceive their homes as integral to their investment portfolio, a significant portion is reassessing this viewpoint in light of market changes.
The survey, conducted in early November with 984 respondents, indicates that 60 per cent consider their homes as part of their investment strategy. Notably, younger individuals, aged 18 to 34, are more likely to view their homes as investments, with 72 per cent holding this perspective, compared to 57 per cent among those aged 35 and older.
Conversely, 24 per cent of respondents indicated that their homes do not factor into their investment strategy, reflecting a similar split between younger and older homeowners. However, the survey suggests that attitudes toward homes as long-term investments may be undergoing a shift.
Eleven per cent of respondents admitted that recent changes in the housing market have altered their perception, leading them to no longer view their homes as good long-term investments. Additionally, 23 per cent stated that their confidence in this regard has weakened. These shifts come amid a multi-year decline in housing prices across most Canadian markets, commencing after the peak in February 2022.
Data from the Canadian Real Estate Association reveals a 13.2 per cent drop in home prices in the past year, marking the most significant decline since data tracking began in 2005. The decline is attributed to the Bank of Canada's efforts to curb inflation through a rapid increase in its benchmark interest rate.
The impact of these rate hikes is evident in the mortgage landscape. While five-year fixed mortgage rates dipped below two per cent in 2021, subsequent central bank rate increases have raised mortgage rates to the range of five to six per cent. For those with variable-rate mortgages, this has translated into substantial increases in monthly payments, as highlighted by a RATESDOTCA report, which indicated a significant interest cost difference for variable-rate holders compared to their fixed-rate counterparts.
Despite these challenges, the survey found that 43 per cent of Canadians regarded their homes as good long-term investments when they made the purchase. Remarkably, even in the face of recent price declines, this perception has strengthened for many respondents.
As Canadians grapple with the evolving dynamics of the real estate market, the survey underscores a nuanced sentiment regarding homes as investments. While some are reevaluating their views amid market shifts, a considerable number still maintain confidence in the long-term investment potential of their homes, emphasizing the complex interplay between market realities and individual perspectives.
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