The 鈥渘arrative鈥� around real estate is helping push more than half of Metro 麻豆传媒映画homebuyers into bidding wars, according to a Canada Mortgage and Housing Corporation (CMHC) survey report released June 27, which paints an unflattering picture of a buyer group easily influenced by wider public perception.
Some 55 per cent of Metro 麻豆传媒映画respondents to the survey 鈥� which also polled people in Toronto and Montreal, all of whom bought a home in 2017 鈥� said that they entered into a bidding war on their purchase. And nearly half (47.9 per cent) of those polled in the region said they had spent more than they had originally budgeted for.
CMHC report author Guillaume Neault, senior housing analytics researcher, wrote, 鈥淗omebuyers measure the value of a home through rule of thumb mechanisms. 鈥業t鈥檚 a hot market, I can鈥檛 miss out, it鈥檚 really tight right now, we will have to revise our budget if we want to get in鈥� 鈥� all are phrases pushing homebuyers to overvalue an investment. For behavioural economists, overreacting to data likens to lacking self-control. The survey looks into bidding wars as a prime example of lacking self-control.鈥�
CMHC's poll examined whether this 鈥渇ear of missing out factor鈥� had an impact on buyers鈥� final spending patterns. It found that those who bought a home earlier than previously planned in order to get into the market sooner, tended to overspend on their initial budget more than those who stuck with their timeline. Further, the data suggested that those who bought later than previously planned also tended to overspend more often, because of rising prices.
Part of the 鈥渘arrative鈥� influencing buyers is the perception of foreign investors driving up prices, said the CMHC. Nearly 68 per cent of Metro 麻豆传媒映画respondents said they believe foreign investors have "a lot of influence" in driving up home prices 鈥� much higher than the 48 per cent in Toronto and 42 per cent in Montreal. It was also much higher than any of the other factors that could influence the housing market, such as domestic investment, land prices/restrictions, employment growth and population growth. CMHC observed that a separate study by Statistics Canada found that 4.8 per cent of homes in Metro 麻豆传媒映画are owned by non-resident owners, including Canadians living overseas. The CMHC report added, 鈥淲hat is striking is the significant gap between perceptions of the public [regarding foreign ownership] and available data.鈥�
With all its data coming from homeowners who purchased in 2017, the survey was not able to consider the more recent softening of the real estate market and whether public perception had changed due to increased or new demand-side cooling measures, such as taxation.
The CMHC concluded, 鈥淭he works of Robert Shiller on narrative economics sound prescient to describe what could be happening in the local imaginary of homebuyers. The human brain has a natural draw towards stories whether they are factual or not... It is still a challenge for economists to measure the impacts of narratives on the housing market, but it is a challenge we will seek to address.鈥�
