Interest in purchasing homes in major city hubs is up by five per cent since last year, despite soaring prices
As Canadians are being beckoned back to their downtown offices in the post-pandemic recovery, a new survey has found that homebuyers are also turning their attention back to major urban cities.
The Bank of Montreal found in its latest home finance survey that the so-called “urban exodus” that took hold in the early days of the pandemic is slowing down, with interest in purchasing homes in major city hubs up by five per cent since last year, despite soaring prices.
“Market conditions are quickly changing,” BMO Capital Markets senior economist Robert Kavcic said in a press release. “We could see much more balanced conditions very soon, as the Bank of Canada is expected to raise interest rates further through the remainder of the year. That will bite into affordability and possibly temper market psychology.”
Kavcic added that in the long-term, economic fundamentals are strong enough thanks to a firm job market to support the housing market.
The change in home purchase plans goes beyond location: Canadians are also changing their strategies on when they will buy and how much they plan to spend on a new home.
Most respondents to the survey, or 73 per cent, said they were willing to spend more on their home purchase, whether it is to keep up with prices (55 per cent of respondents), because they have more income (28 per cent) or due to higher savings amassed during the pandemic (27 per cent). More than half of these respondents (55 per cent) expect to use most or all of their pandemic-fuelled increased savings to put towards their home and get a bigger mortgage with it, amounting to a 20 per cent increase from last year.
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The majority of survey respondents (83 per cent) expect the price of a home to continue to rise next year as inflationary pressures add more costs to Canadians’ home-buying dreams.
“As consumers consider buying a home, they have to deal with rising costs on a number of levels,” said Hassan Pirnia, head of personal lending and home financing products at BMO Financial Group, in a release. “These financial hurdles are having a major impact on the purchase plans for these consumers, in terms of what they will buy and when they will buy. Most understand that they will need to spend more; the impact on timelines is split, with some buying sooner before prices go up more, and some holding off to see if prices come down.”
BMO’s survey found that the expected amount to pay for a house increased by $100,000, a jump of 26 per cent year over year. On average, homebuyers nationwide are now expecting to pay $588,000 for a home.
Source: Financial Post