Moving couch

Bricks & Sticks

by Desi Auciello

Desi Auciello is the 2006 GTHBA President, and is also president of Cachet Estate Homes.

Toronto buyers prefer newly built homes, RBC finds

Date: March 10, 2006

According to RBC Royal Bank's 13th annual homeownership survey, Greater Toronto Area home buyers have a decided preference for newly built homes relative to the national average. The survey also reveals that overall intentions to buy a home in the next two years remain the same as 2005, at 29 per cent.

According to the survey, one-third of GTA respondents intend to purchase a newly built home, well above the national average of 26 per cent or the provincial average of 27 per cent. This is likely a reflection of the tight conditions in the local resale market, where the pressure to act so quickly can be disconcerting to buyers. It is also a positive reflection of the tremendous choice available in the new home market, be it product type, price range or location.

While the overall intention to buy, as measured by those stating that they are "very likely" or "likely" to buy, has not changed compared with the 2005 survey, RBC notes that buyers are less intense, with the weighting of "very likely" buyers decreasing from 13 per cent to 10 per cent within the sample.

"This year's results are a definite change from what we witnessed over the last five years," said Catherine Adams, RBC Royal Bank's vice-president of home equity financing. "The intention to buy is still evident, but the intensity to do so is nowhere near as great." Adams attributes the change in intensity to a number of factors including a natural slowing from recent record home-buying seasons, an exhaustion of pent-up demand, and the locking-in and staying put of recent buyers as a hedge against a potential rise in mortgage rates. As proof of this latter point, Adams notes that twice as many renters than owners (15 per cent versus eight per cent) are very likely to purchase a home within the next two years.

However, as Paul Bimm, vice president of builders markets at RBC points out, an overwhelming 91 per cent of all Ontarians regard owning a home as a good investment.

Moving on up

Of those Ontario respondents who intend to buy, 52 per cent plan on buying a bigger home than their current residence, up five per cent over last year, while 29 per cent say they will be looking for something around the same size as their current residence, down four per cent from last year, leaving the 19 per cent balance looking to downsize.

When it comes to housing preference, 71 per cent of Canadian and Ontario buyers are planning to buy a detached home, in spite of our provincial government's barrage of legislation and regulation designed to limit consumer choice. This was followed by condominium/loft at 12 per cent; town-homes at eight per cent; and semi-detached at four per cent. Not surprisingly, buyers aged 35-44 are the most likely to buy detached while Canadians over 55 are among the most likely to be looking at condominiums.

Home values up

Fifty-nine per cent of homeowners in the GTA hold a mortgage on their home and have an average amount of $135,438 owing. GTA homeowners estimate the market value of their homes at $311,477 and say their homes have increased in value by approximately 15 per cent over the last two years.

On an Ontario basis, sixty-one percent of homeowners hold a mortgage on their home with an outstanding balance of $111,846. The average Ontarian estimates their home to be worth $242,388 with 14 per cent appreciation over the last two years.

The national average mortgage is $95,840.

Half trillion industry

RBC notes that the housing industry is a key economic indicator and consumer confidence barometer for the Canadian economy. The total value of home construction, purchases and renovations is forecasted to be approximately $500 billion for 2006.

RBC is the largest residential mortgage lender in Canada, with more than $91 billion in loans outstanding in 2005 and over 15 per cent of the Canadian mortgage market. As the country's number one source of financial advice on home ownership, consumer surveys are one way in which RBC provides insight to Canadians about the marketplace in which they live.

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