BMO, the bearer of good news?

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There seems to be some sliver of light at the end of a long dark tunnel for brokers with BMO’s latest Housing Confidence Report indicating that nearly half of all Canadians intend to purchase a home within the next five years.

“As much as 46 per cent of Canadian home owners intend to buy a property in the next five years,” said Martin Nel, VP of lending and investment for BMO. “This implies that Canadians are feeling confident in the current real estate market environment.”

Consumer confidence in three key market regions overtook the national average. The semi-annual report found that 62 per cent of Canadians in Calgary, 57 per cent in the Greater Toronto Area and 53 per cent in Vancouver plan to buy a home within the next five years.

This buoyant sentiment, however, could be tenuous according to the report. A modest increase in prices could derail purchase plans with 72 per cent of households indicating they would feel “significant strain” over an increase in monthly mortgage payments, according to BMO.

“Rising debt and elevated house prices have increased the vulnerability of a meaningful number of households,” said Sal Guatieri, senior economist with the bank. “Their financial situation will worsen if interest rates increase even moderately.”

For instance, intentions to buy dropped from 46 per cent to 36 per cent in event of a five per cent increase in home prices. With a price increase of five per cent, purchase intentions in Ontario will drop to 39 per cent, slide to 42 per cent in Alberta and go down to 39 per cent in British Columbia.

The report also shed light on how the mortgage rule changes have affected consumers.

One in five respondents reported that they are less likely to purchase a new home because of the changes. Furthermore, 29 per cent who plan to buy a new home said they will be spending less on the purchase because of the mortgage rule changes.

The report also found that:

  • 18 per cent plan to downsize to a smaller home and another 18 per cent intend to purchase a larger home
  • 10 per cent plan to sell their home and move to a rental community, or a retirement community or move in with family.
  • 21 per cent plan to purchase additional property for income, investment or recreation

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