According to a recent real estate survey commissioned on behalf of TD, one-third of Canadians surveyed (32 per cent), are willing to take part in a bidding war in order to secure their dream home, as housing prices continue to soar in many markets across the country.
Interestingly, the TD survey also reveals that a homebuyer’s willingness to offer above asking typically varies with age. More than half (51 per cent) of young adults under 35 are prepared to offer above list price, while fewer than one-third (31 per cent) of respondents between 35 and 54, and just 18 per cent of those 55 and older, are willing to do the same.
The TD 2021 Real Estate survey results arrive alongside proposed government changes to the qualifying rates for uninsured mortgage loans. If implemented, the guidelines would require borrowers to qualify at their mortgage contract rate plus two percentage points, or 5.25 per cent, whichever is higher. As housing prices across the country continue to rise, the change is designed to help buyers avoid over-extending themselves. It also underscores the need for advice along every stage of the homebuying process – but particularly when it comes to affordability.
Budgeting for a bidding war
“There’s no question that the price of homeownership is much more than your down payment and monthly mortgage payments,” says Jared Jarman, Associate Vice President, Specialized Advice at TD. “In today’s competitive environment, buyers need to ensure they’re keeping a close eye on their budget, building in some wiggle room so that they know they’re able to cover expected and unforeseen costs. A financial advisor can help by working with you to develop a budget that lets you know how much you may be able to afford before you begin to house hunt,” continues Jarman.
Despite a widespread willingness amongst younger survey respondents to enter a bidding war, most Canadians are still reluctant to bid over-asking when multiple offers are on the table. In this situation, 45 per cent of respondents said they would stand firm on their initial offer. But for those willing to do what it takes to win a bidding war, Jarman emphasized the importance of developing a budget range beforehand that allows for some flexibility. Even amongst Canadians open to going beyond the list price for their dream home, budgeting and setting limits is key, he adds.
The TD survey results also reveal how competitive respondents are willing to be. According to the survey, approximately two in ten (19 per cent) of competitive bidders said they would exceed the asking price by up to $50,000, while just 13 per cent would push their offer further, between $50,000 and $100,000 over-asking and beyond.
Affordability and the great unknown
According to TD, more than half of Canadians surveyed (52%) feel home ownership is less attainable now than it was pre-pandemic thanks to changing house prices. Unsurprisingly, the survey also reveals that changes in financial security over the last year have dampened home-buying opportunities for many Canadians, with one-third of respondents saying unexpected changes in their personal finances have made the prospect of homebuying less attainable now than before the pandemic.
“We know Canadians have had to deal with incredibly unprecedented circumstances this past year, including unemployment and other financial challenges for many,” said Jarman, noting that TD has safeguard options in place to protect borrowers from unanticipated challenges. “TD Mortgage Protection is just one-way customers can help protect themselves from unforeseen life events including critical illness and even death.”
Fifty-seven per cent of TD survey respondents said they consider finding a home within their budget to be the biggest challenge to buying a home within the next year. The ability to afford a suitable home appears to be a greater concern amongst residents in Ontario (63 per cent) and B.C. (62 per cent) compared to Quebec (48 per cent) and the Prairies (43 per cent).
While it’s hard to know what comes next, Canadians can trust that TD has a variety of solutions to help customers achieve home ownership and protect the homes they’ve worked so hard to purchase.
Fast facts from the TD 2021 Real Estate During COVID survey:
- Among other challenges noted in the survey results were the uncertainty that comes with the COVID-19 pandemic (15%) and the lack of housing supply (10%).
- Canadians value their space during the pandemic, and are most likely to see features like backyard space (43 per cent) and square footage (40 per cent) as important considerations when buying a home.
- While the need for space may be unsurprising, Canadians’ desire to be within close proximity to everyday amenities (grocery stores, banks, etc.) hasn’t changed – just over half (51 per cent) compared to 50 per cent prior to the pandemic.
- Four in 10 (40 per cent) Canadians surveyed who currently own a house or condo say rising prices in their area would make them more interested in listing.
SOURCE TD Bank Group