Canadians are now seeing the housing market as a less attractive investment option, with the two largest declines in British Columbia and Ontario.Getty Images/iStockphoto
Investor sentiment has hit its lowest level since the financial crisis, with many Canadians viewing the housing market as a less attractive investment option, according to a Manulife Financial poll.
"Canadian investors are facing a long list of uncertainties, including tremendous volatility in both oil prices and the value of the Canadian dollar," Frances Donald, senior economist, Manulife Asset Management, said in a statement.
The 2016 Manulife's Investor Sentiment Index, a semi-annual measure of investors' views on a range of asset classes, savings and investment vehicles, dropped to 16 from 19 six months ago. It is the lowest point since the financial crisis when the index dropped to 11 in March, 2009, and 5 at the end of 2008. Since the 2008-2009 crisis, the index had remained steady within the mid-to-high-20s. The all-time high of 34 was reached in 2006.
The survey, which was conducted in December, 2015, is based on responses from 1,001 Canadians. The index is calculated using six asset class indexes: stocks, fixed income, cash, balanced funds, investment property and an investor's own home.
Canadians are now seeing housing as a less attractive investment option, with the asset class dropping 3 points in the last year to 47. The two largest declines are in British Columbia and Ontario. Canadians are also less likely to prioritize investing in their home in the near future – falling five per cent in the last six months.
"As house prices continue to rise, the growing perception among many Canadians is that housing has become overvalued," says Ms. Donald. "Homeowners may be feeling that the additional benefits of investing further in their own home will not be reflected in the future value of their home.
This is probably more true in Toronto and Vancouver and surrounding areas, where house prices are considered to be more overvalued than in other regions."
At the same time, almost half of survey respondents believe that interest rates will stay the same for the next 12 months, although 77 per cent say interest rates will not have an impact on their investment strategy.
"The Bank of Canada has been suggesting that interest rates are on hold or may even fall further over the coming year," said Ms. Donald. "Yet, interestingly, 40 per cent of Canadian investors still expect interest rates to rise, highlighting the ongoing uncertainty around the interest rate outlook."