Most Canadians planning to buy a home are determined to avoid becoming “house poor” — but that goal could be easier said than done.
According to a new poll from RBC, 60% of prospective homebuyers in Canada said they want to avoid spending 30–40% of their total income on home ownership costs — the proportion RBC used to define house poorness.
But avoiding house poorness could be a challenge. Forty-eight per cent of respondents planning to buy a home in the next two years had a budget of less than $500,000 — and the average price of a house in Canada was $678,091 in February, RBC noted.
Buyers in Saskatchewan and New Brunswick — where average house prices are $290,789 and $224,785, respectively — may be best positioned to comfortably afford a home. Avoiding house poorness in Ontario and British Columbia — where average prices are $864,159 and $887,695, respectively — could be more of a challenge.
Fifteen per cent of respondents to the RBC poll who currently own a home said they were house poor.
The dream of owning a home is evaporating for some; 36% of respondents under the age of 40 said they would never own a home, and 62% of all respondents said the majority of Canadians will be priced out of the housing market over the next decade.
Eighty-six per cent of respondents who plan to buy a home in the next two years had some money saved for a down payment — $42,000, on average. Forty per cent had less than $25,000 set aside for a down payment.
Being able to afford a home could soon become more difficult for some buyers. Last week, the Office of the Superintendent of Financial Institutions proposed increasing the stress-test requirements for uninsured mortgages.
“In addition to evaluating what you can afford now, potential home buyers should put their finances through a stress test to see if they can continue to carry the cost of owning a home if interest rates increase or if they had an unexpected expense or income loss,” said Amit Sahasrabudhe, vice-president, home equity financing, products and acquisitions, RBC.
RBC commissioned Ipsos to conduct an online survey of 2,000 adults in Canada from Jan. 21–28. Online polls cannot be assigned a margin of error because they do not randomly sample the population.