Survey Finds that More than 25% of Renters are Planning to Purchase a Home in the Next Two Years

Over a quarter of Canadians who are renting say they plan to buy a home in the next two years, according to a recent survey.

However, 69 percent of renters said homeownership was not in the plans for the near future. The main reason was they didn’t earn enough money to get a home in the area they wanted to live, according to the survey.

“The rental sector is not immune to the significant affordability challenges stemming from Canada’s acute housing shortage,” president and chief executive officer at Royal LePage Phil Soper said.

“High mortgage rates have made it difficult for many to purchase a home, forcing some to move into, or remain longer than planned, in the rental market.”

Half of renters who said they plan to buy a home shortly also said they will have a down payment that is under 20 percent, while 26 percent said they would have 20 percent to put down toward a home purchase. Fifteen percent said they would have more than 20 percent.

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The survey found that over half of those looking to buy a home will be relying on savings (53 percent), with 46 percent saying they will be using a registered First Home Savings Account (FHSA). Nearly one in three (29 percent) said they will be using RRSP savings through the federal Home Buyers’ Plan, and 25 percent said they would be using money received from family or an inheritance. (Respondents were allowed to select more than one answer)

Renters Consider Where to Buy

Renters who said they intended to buy a home in the next two years may face a long commute if they can’t afford to buy a home in their current city. While 44 percent they believe they can afford a home in the same area they are renting, 37 percent said they didn’t think it was possible. Among the latter, 40 per cent said they’d have to travel over 50 kilometres to find a home within their budget. Twenty-one percent said they will have to buy a place 31-50 kilometres away from where they currently live.

“We know that Canadians widely consider home ownership a worthwhile long-term investment and a quintessential part of the Canadian dream. So much so, that many are willing to relocate in order to make their home ownership dreams a reality,” Mr. Soper said.

“I believe we will continue to see migration from southern Ontario and high-priced regions in B.C. to more affordable markets across the country in the future,” he added.

One-third of those surveyed said they were waiting for interest rates and property prices to come down before they buy, with 22 percent said they were saving up for a down payment. Another 20 percent said they did not qualify for a mortgage.

“Falling borrowing costs will lower the threshold to qualify for a mortgage, helping renters become owners,” Mr. Soper said, adding it also creates a double-edge sword as there will be increased competition when renters enter the market.

“While some will wait for home prices to become more reasonable, Canada’s housing shortage will leave them waiting indefinitely,” he said.

Price of Renting

The survey also looked at the price renters are paying, with 37 percent spending between 31 and 50 percent of their income on rent, and 16 percent saying they spend more than half their income on rent. That number increases for those living in Vancouver and Toronto where the number of renters paying more than half their income on housing is 27 percent and 19 percent respectively.