More than half of the country believes home prices will never fall, according to a new poll from CIBC.
Despite lofty valuations in the Toronto and Vancouver housing markets, 54 per cent of respondents to the CIBC poll say housing prices will rise indefinitely, while only 40 per cent think prices will decline over the course of the next five years.
David Madani, senior Canadian economist at Capital Economics, thinks the unbridled optimism is just one more sign the Toronto housing market is in bubble territory.
“The fact that the majority of Canadians still think home prices can continue to shoot up is sort of testament to the fact we’re in a full-blown housing bubble,”
According to the poll, those high prices are keeping homeowners on the sidelines, with 62 per cent of respondents saying they’re reluctant to sell their home, lest they become buyers again.
Home prices in Toronto are up more than 30 per cent over the course of the last year, and prices in Vancouver have risen more than 14 per cent.
Those who are looking to sell are largely of the baby boomer cohort, with more than two-thirds of respondents older than 55 saying they plan to downsize to a smaller home or condo. CIBC says boomers are motivated to sell not just due to the ease of maintaining a smaller home, but also as a boost to their retirement savings.
What’s less clear is who they’re going to sell their home to: 52 per cent of the millennial generation either don’t believe they’ll ever own a home, or are unsure if home ownership is in their future, according to the CIBC poll.
Of those in the younger generation who are already in the housing market, more than four of every five plan to sell, with 63 per cent complaining the mortgage and housing costs are making them cash-poor.
Madani said a confluence of the rising prices and expectations for higher interest rates is causing the skittishness for millennials.
“You see panic starting to creep in at the lower end of the market,” he said. “When you look at the younger homebuyers who are already fairly cash-flow poor, regret is starting to sink in because they realize they’re cash-flow constrained and also worried that at some point interest rates might begin to go up.”
“There’s definitely concerns creeping in to confidence levels of Canadian households.”
Post Your Comment: