BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

March 05, 2014 06:00 ET

BMO Home Buying Report: Price Competition Among Home Buyers Heating Up In 2014

- One-in-three Canadians willing to enter a bidding war when the time comes to buy with competition highest in Toronto and Vancouver

- Current homeowners visited an average of 9.5 homes before buying

- According to BMO Economics, the average transaction price is up nearly 10 per cent year-over-year as of January

- BMO recommends house hunters get pre-approved before setting out on the home buying journey

TORONTO, ONTARIO--(Marketwired - March 5, 2014) - According to the BMO Home Buying Report released today, more Canadians are willing to fight it out to secure a property, with 34 per cent of Canadians willing to enter a bidding war when it's time to buy a home, an increase of 6 points, or 21 per cent, from a year ago.

The report, conducted by Pollara, revealed:

  • In major city centres, appetite for competitive bids is the highest in Toronto and Vancouver (44 per cent and 41 per cent respectively)
  • Provincially, prospective buyers in the Prairies and British Columbia are the most willing to compete on the price of a home (38 per cent respectively)
  • Current homeowners say they visited an average of 9.5 homes before buying. While half (49 per cent) were successful on their first bid, this figure drops to 42 per cent among those who bought in the past 5 years - including 32 per cent in Vancouver and 24 per cent in Toronto

While many suspect bidding wars are triggered by sellers who deliberately price their homes below market, the report shows that just 15 per cent of owners have that motivation, with those on the Prairies and in Toronto the most likely to pursue this strategy - but even then the numbers are modest at 24 per cent and 22 per cent respectively.

According to BMO Economics, average home prices across Canada continue to rise. Across the country, prices have gained momentum in the past year, with the average transaction price up nearly 10 per cent year-over-year in January. The average home sale price in Canada is currently just over $400,000.

"Calgary's market continues to see the strongest fundamentals; Vancouver has rebounded from a soft patch; while Toronto's market remains relatively balanced overall, though the condo market is more amply supplied," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Overall, sales are expected to hold relatively steady in the year ahead, with price growth in the low single-digit range, below the rate of income growth."

"The competition for real estate in Canada, particularly in hotter markets, can be fierce, however it's important that buyers avoid getting caught up in the moment and respect the budget parameters they've established," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "For those willing to negotiate on the price of a home, the most important part of preparing is ensuring they get pre-approved by their bank so they know exactly what their limits are and can stick within them."

Willingness to Enter a Bidding War by Region and Major City

Willingness By Region
National % Willing to Enter Bidding War ATL QC ON MB/SK AB BC Mon Tor Cal Van
34% 34 % 31 % 35 % 38 % 30 % 38 % 31 % 44 % 38 % 41 %

BMO offers the following advice for Canadians searching for a house or condo this spring:

Get pre-approved: Get a head start on planning by getting pre-approved for a mortgage before setting out to lock down the perfect home. Once pre-approved, the bank will honour the rate for the duration of the pre-approval period - 90-days at BMO - keeping you protected if interest rates rise.

Stress-test your budget: Stress-test your financial budget using a mortgage payment based on a higher interest rate. If rates rise even 1 percentage point, you will need an additional $107 per month on a $200,000 mortgage.

Live within your means: Stick to the "one-third" rule to ensure you're living within your means. Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of overall household income.

Think carefully about fixed vs. variable: While variable rate mortgages have been a winning strategy over the long term, fixed rate mortgages (currently near historic lows) come with the peace of mind of being insulated against rate increases.

Survey results cited in the BMO Home Buying Report are from online interviews with a random sample of 2007 Canadians, 18 years of age and over. Of these, 1051 were prospective home buyers and 1412 were current home owners. The survey was conducted between January 24th and February 3rd, 2014. As a guideline, a probability sample of 1051 would yield results accurate to ± 3.0%, 19 times out of 20, while a probability sample of 1412 would yield results accurate to ± 2.6%, 19 times out of 20. Data has been weighted by region, gender, and age, based on the most recent Census figures, so that it is representative of all adult Canadians.

About BMO Financial Group

Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America with total assets of $593 billion and approximately 45,500 employees as at January 31, 2014. BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers.

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