Four in ten Canadian homeowners are “house poor,” spending more than 30% of their income on home ownership costs, said the Royal Bank of Canada (RBC).
A report released by the bank Monday found that homeowners are overextending themselves to keep up with mortgage payments, property taxes and maintenance and utility fees. This is not without its consequences: 90% of those surveyed said that dedicating a large proportion of their incomes to home ownership costs had the potential to incite “mental stress.”
Canadians are split on whether that stress is a fair exchange for being a homeowner. While 47% of those surveyed by RBC feel that the mental pressures of being house poor are worth the sacrifice, over half (51%) said that they would never put themselves in that financial position.
As home ownership continues to remain out of reach for many Canadians — especially if they’re young — many are shifting their expectations to account for the realities of the economy. But, it also seems that many prospective homebuyers are unwilling to put themselves in a precarious financial position to secure a piece of property.
More than half of Canadians (56%) said that they would wait until next year to buy a home, while 45% of this cohort are prepared to push back their home purchase two years or more. The majority (55%) of those who are willing to wait two or more years to buy were between the ages of 18 and 34.
These numbers can be explained by a widespread expectation that home prices will drop. Of those waiting to buy, 54% across the country believe that home prices will fall. In British Columbia, which is home to Canada’s most expensive housing market, that number rises to 68%. In Ontario, that number sits at 58%.
Prospective homeowners are also planning to put down larger down payments to cut down on their mortgage costs. Nearly half (47%) say they’d like to make a down payment of at least 15% — up 10 percentage points from last year. Only 16% expect to put down the minimum 5% for their home purchase.
“While many Canadians tell us that house poor may be a reality, it doesn't have to be,” said Nicole Wells, vice president, home equity financing at RBC. “It may require more effort or time upfront, but being more prepared in the home-buying journey can help bring it all together.”
“Let's face it,” she adds. “The white picket fence or pride of your name on the deed is a rite of passage and doing it responsibly means there's still money for the extras in life."