Canadians’ house buying plans drop sharply: RBC

A majority of Canadians are taking a wait-and-see approach when it comes to home purchases and plans to buy have suffered the steepest year-over-year drop in two decades, thanks to Ottawa's move to tighten mortgage rules last summer, says a poll released on Tuesday by the Royal Bank of Canada.

RBC's annual home ownership poll showed just 15 per cent of Canadians say they are likely to buy in the next two years, down from 27 per cent last year. The 12-percentage-point drop is the biggest year-over-year fall in overall buying intention as tracked by the poll, which has been conducted annually for the past 20 years.

“The more cautious mood this year is not surprising and is consistent with broader economic and industry forecasts," Sean Amato-Gauci, senior vice-president, home equity financing at RBC, said in a statement.

An unseasonably warm spring, ultra-low rates and anticipation of mortgage rule changes may have led many Canadians to buy homes in the first half of 2012, said Amato-Gauci.

Last summer, the federal government implemented tighter mortgage rules -- the fourth move in as many years -- to calm the once-hot real estate market and limit the record levels of debt Canadians have accumulated in recent years.

Data earlier this month showed that home sales in Canada fell in February and the rate at which people amassed household debt slowed in the fourth quarter, adding to the pile of evidence that the stricter rules are filtering through.

Overall, 75 per cent of Canadians say that Ottawa's move last summer will impact or delay prospective homebuyers from getting into the market.

At the same time, however, the poll showed nearly six-in-10 recent and prospective homebuyers say that a shortened mortgage amortization period to 25 years from 30 years had little to no impact.

Affordability is a key barrier

Despite the caution, 84 per cent believe that a house or condominium is a good investment.

The poll suggests confidence in the housing market is still high and young Canadians are the bright spot as they look to buy their first home and seek the advice to do it right, said Amato-Gauci.

Four-in-10 Canadians planning to enter the housing market over the next two years will be first-time homebuyers, says the poll conducted on 3,005 Canadians between Jan. 31 and Feb. 8.

But times are tight. Almost half of first-time homebuyers cite affordability as a top reason for not buying. Other key factors cited were saving for a down payment, 32 per cent, and job security at 28 per cent, with both factors rising in importance from last year.

Canada-wide, Atlantic Canadians and residents in Manitoba and Saskatchewan are the least likely to buy a house in the next two years, while British Columbia is the only region where a majority of people describe the current market as a buyer’s market.