More than a third of Canadian homeowners find housing in their area unaffordable, Manulife Bank of Canada Debt Survey Shows

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Nov 26, 2015, 08:30 ET

Two in three homeowners expect housing prices to increase in the next year
Nearly four in ten homeowners didn't have enough money in the bank to cover household expenses at least once in the past year
Almost 75 per cent feel prepared to deal with an unexpected household expense, yet average amount in emergency fund is low
The average Canadian homeowner has $175,000 in mortgage debt

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WATERLOO, ON, Nov. 26, 2015 /PRNewswire/ - More than a third (38 percent) of Canadian homeowners feel that housing in their area is unaffordable, according to a new survey released by Manulife Bank of Canada.

According to the bi-annual survey, 28 per cent of respondents found their local housing market "somewhat unaffordable", while another 11 per cent described it as "not affordable at all." Just over half (51 per cent) called housing in their area "somewhat affordable" and only one in ten felt housing in their area was "very affordable."

Perception of affordability varies by region, as homeowners in Canada's Atlantic provinces are most likely (83 per cent) to feel housing is affordable, while those in British Columbia are least likely (39 per cent).

The survey also revealed that those in Canada's largest urban areas (Vancouver, Calgary, Edmonton, Toronto, and Montreal) are much less likely to describe their housing market as affordable (46 per cent) than those elsewhere in Canada (68 per cent). Perceived lack of housing affordability was most acute in Vancouver, where just one in three (33 per cent) indicated housing was affordable.

Housing costs may be putting pressure on other aspects of homeowners' finances. While almost three quarters (73 per cent) of homeowners believe they're somewhat or completely prepared to deal with an unexpected household expense such as a major car repair or a furnace replacement, other results suggest this may not be the case. For example, more than one in three homeowners (38 per cent) were "caught short" at least once in the past year - where they didn't have enough money in their bank accounts to cover expenses.

While some of those caught short were able to access a line of credit (33 per cent) or rainy-day savings (23 per cent), others had to carry a balance on a high-interest credit card (32 per cent) or even borrow money from a family member (14 per cent).

"The challenge faced by many Canadians is that their income is relatively stable from month-to-month, but their expenses can vary significantly," said Rick Lunny, President and Chief Executive Officer, Manulife Bank of Canada. "Access to rainy day savings or a low-cost line of credit are good options to safeguard against these fluctuations. However, if your backup plan is to carry high-interest credit card debt or borrow from a family member - you could be putting undue stress on your finances or relationships." The size of many Canadians' rainy-day accounts also suggests that they may be less prepared than they believe. Fewer than one in four (24 per cent) homeowners has more than $5,000 set aside for an emergency, and half indicate they either have "$1,000 or less", or don't know how much they have for emergencies.

"While it's always a good idea to have some cash savings available for emergencies, it doesn't necessarily make sense to have a large emergency fund if you also have debt," said Lunny. "In some cases you'd be better off using some of that money to pay down your debt and have a low-cost line of credit available for larger unexpected expenses."

While homeowners who work with a financial advisor (56 per cent) have the same median household income ($85,000) as those who don't (44 per cent), those with an advisor appear to be in better financial shape on a few fronts. They're less likely to have increased their debt in the past year (17 per cent vs. 22 per cent of those with no advisor), more likely to feel somewhat or very prepared for an unexpected expense (80 per cent vs. 65 per cent) and have more "rainy day savings" (median of $4,500 vs. $2,000).

Housing Prices to Increase?

The survey also found that almost two in three (63 per cent) homeowners expect housing prices in their area to increase next year while fewer than one in 10 (7 per cent) expects them to decrease - although this finding varies significantly by region. In Alberta, Manitoba and Saskatchewan, almost one in five (19 per cent) expect prices to decline in the next 12 months, while just 3 per cent of homeowners in Ontario, 4 percent in British Columbia and 4 per cent in Quebec expect price declines in the next year.

Nationally, about seven in 10 (71 per cent) of Canadian homeowners between ages 20 and 59 have a mortgage, and report an average of $175,000 of mortgage debt. Regionally, Alberta ($238,000) and British Columbia ($228,000) reported the highest average mortgage debt, while Ontario ($167,000), Manitoba/Saskatchewan ($151,000), Atlantic Canada ($151,000) and Quebec ($141,000) reported much lower levels of mortgage debt.

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About the Manulife Bank of Canada Homeowner Debt Survey

The Manulife Bank of Canada poll surveyed 2,372 Canadian homeowners in all provinces between ages 20 to 59 with household income of $50,000 or more. The survey was conducted online by Environics Research from July 22 - August 7, 2015. National results were weighted by age, gender and region.

About Manulife Bank

Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife. As Canada's first advisor-based bank, it has successfully grown to more than $20 billion in assets and serves clients across Canada.

About Manulife

Manulife Financial Corporation is a leading international financial services group providing forward-thinking solutions to help people with their big financial decisions. We operate as John Hancock in the United States, and Manulife elsewhere. We provide financial advice, insurance and wealth and asset management solutions for individuals, groups and institutions. At the end of 2014, we had 28,000 employees, 58,000 agents, and thousands of distribution partners, serving 20 million customers. At the end of September 2015, we had $888 billion (US$663 billion) in assets under management and administration, and in the previous 12 months we made more than $23 billion in benefits, interest and other payments to our customers. Our principal operations are in Asia, Canada and the United States where we have served customers for more than 100 years. With our global headquarters in Toronto, Canada, we trade as 'MFC' on the Toronto, New York, and the Philippine stock exchanges and under '945' in Hong Kong. Follow Manulife on Twitter @ManulifeNews or visit www.manulife.com or www.johnhancock.com.