Housing market uncertainty and inflation rates causing anxiety for Canadians: report

Rising inflation and increased debt are creating a big amount of anxiety for Canadians, a new report suggests.

MNP, a bankruptcy trustee firm, said its quarterly consumer debt index fell 15 points to an all-time low of 77 points since its last survey (the lower the score indicates higher anxiety about debt).

MNP President Grant Bazian says inflation is destroying household budgets while financially fragile Canadians are also facing rising borrowing costs. 

With Toronto being one of the most expensive housing markets in Canada, Royal LePage Toronto-based realtor Jason Bondy-Sawyer says buyers are taking a more “cautious approach” in the market.

“Before buyers had the mentality of, ‘Let’s hurry up and get into the market before we get priced out and the train leaves without us.’ Now, buyers are pausing and trying to get a grip on what’s happening with prices before deciding if they should make a move,” Bondy-Sawyer said in a statement to Now Toronto.

Based on online interviews conducted in December, the report says the percentage of Canadians concerned about debt rose to 47 per cent, a seven per cent increase, and a record high. Sixty-four per cent of those interviewed said that a rise in interest rates has them concerned about their ability to pay bills, while 59 per cent say if interest rates continue to rise, they will be in financial trouble. 

Canadians have a right to worry, as this comes at a time when 2022 saw one of the biggest single-year shifts on record for housing activity.

Statistics released on Monday by the Canadian Real Estate Association (CREA) showed the shift from record-high sales to just below the 10-year average at the end of 2022.

“The housing market story of 2022 was about high inflation and rising interest rates. The 2023 market will depend on the timing and extent those factors move back in the other direction,” CREA’s Senior Economist Shaun Cathcart said in a statement. 

National home sales, on the other hand, were up 1.3 per cent month-over-month in December, with gains led in both Edmonton and Ottawa. 

CREA also noted that the average sale price saw a 12 per cent year-over-year decline in December. This was also coupled with home sales being down by 39 per cent from Dec. 2021, which could be due to the Bank of Canada raising lending rates.  

However, there is a silver lining. In Toronto and the Greater Toronto Area, Bondy-Sawyer sees confidence and a ramp-up return to buyers and sellers in 2023.

“It’s looking like the bulk of the rate hikes and value adjustments have now happened. In fact, the average sale price in the GTA has been relatively stable now for the past six months,” he said. 

Actual (not seasonally adjusted) national average home prices were $626,318 in December 2022. However, these prices can be misleading as Toronto and Vancouver, Canada’s most expensive housing markets, greatly influence the national average price.

Because of this, CREA uses the House Prince Index (HPI) to account for volume and housing type sold. Excluding those two markets would cut almost $118,000 from the national average price. Across Canada, the HPI was down 13 per cent from its peak last year, with Ontario and B.C seeing the biggest declines.

(Photo caption: Rising inflation and increased debt are creating anxiety for Canadians, according to a new report by MNP. Courtesy- Canva/ByMPhotos)

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