Having trouble moving into a bigger home? You’re not alone.
Prices of bigger and more expensive homes in Canada are rising significantly faster than those of cheaper properties, Canadian Imperial Bank of Commerce economist Benjamin Tal has found. The phenomenon is limiting peoples’ ability to trade up, and causing many to choose to renovate their existing home instead.
The trend is pronounced in cities including Toronto, Ottawa, Calgary and Edmonton. Spending on home renovations as a percentage of total residential investment is at its highest level on record.
And the “move up” market is becoming paralyzed at the same time that tighter mortgage rules and higher home prices have knocked many potential first-time buyers out of the market, Tal says. “The homeownership rate among Canadians aged 25-35 (first-time homebuyers) has fallen from 55 percent in 2012 to the current 50 percent,” he says in a report to be released Monday. The rate has remained stable for people over age 35.
These factors will influence prices. Because many people will be staying put in low-to-mid-range-priced houses and condos, the supply of available units will be lower than it otherwise would be, which Tal says will work to limit downward pressure on prices.
Higher-priced houses and condos are more vulnerable to price adjustments, he says.
And he reiterated his view that restrictions in supply coupled with affordability pressures means that Canada’s homeownership rate, at close to 70 percent, has probably peaked for the time being.