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Changes in taste for housing Gubbe, Robert Maxwell

Abstract

This paper attempts to determine whether changes have occurred in Canadians' preference for housing. To this end, it has been proposed to test the thesis that Canadians' taste for housing, as represented by the portion of income devoted to it, is in decline. Most of the literature on the subject deals with the housing expenditure-income relationship as it applies to the United States; much of this in turn describes the relationship in terms of elasticities. Although data with respect to the Canadian situation is largely restricted to one segment of the new housing .market, it has been deemed proper to begin to describe the Canadian housing-income relationship. Data concerning buyers of individually financed dwellings for owner occupancy under the National Housing Act were used to make intertemporal comparisons during the postwar period of several financial variables. The comparisons of variables were modified by means of a comparison of the incomes of families borrowing under the NHA and other non-farm Canadian families in similar circumstances in terms of size of family, age of head of family, tenure, and size of town of residence. The results of the analysis indicate that for NHA buyers, the ratio of house price to income has declined in value. A similar trend is evident from Statistics Canada data for all Canadian families. For NHA buyers the decline in the ratio of house price to income has been the result of a continuous decline in the percentage of income paid down on the dwelling and a recent decline in the ratio of mortgage amount to income. The decline in the ratio of mortgage amount to income is seen as an adjustment to higher interest rates, but the steady decline in the initial commitment is seen as evidence of a decline in preference for housing.

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