BMO Financial Group

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BMO Financial Group
BMO Bank of Montreal



BMO Bank of Montreal

October 23, 2012 06:00 ET

BMO Introduces Housing Confidence Report: Reveals Homeownership Intentions, Price Expectations and Affordability

Inaugural report tracks confidence in Canada's housing market among Canadian homeowners

- Buying intentions: 46 per cent intend to buy a property in the next five years; however, the market would cool quickly if prices increase by five per cent

- Price expectations: Most homeowners in Canada expect modest price increases in all cities and provinces over the long term with the exception of those in Vancouver

- Mortgage affordability: Over half have made cutbacks over the past year to make mortgage payments

TORONTO, ONTARIO--(Marketwire - Oct. 23, 2012) -

Editors Note: There is an infographic associated with this press release.

According to the first BMO Housing Confidence Report released today, nearly half of Canadian homeowners (46 per cent) intend to buy a property in the next five years, signalling a high level of confidence in Canada's housing market. A modest increase in prices, however, would derail plans to buy; meanwhile, three-quarters (72 per cent) of households would feel a significant strain if they were to experience a modest increase in monthly mortgage payments, such as one caused by an increase in interest rates.

The report reflects the sentiment of Canadian homeowners after the new mortgage regulations introduced by the Federal Government came into effect in July 2012.

"The fact that 46 per cent of Canadian homeowners intend to buy a property in the next five years implies that Canadians are feeling confident in the current real estate market environment," said Martin Nel, Vice President of Lending and Investments, BMO Bank of Montreal. "However, that certainty is tempered, given the adverse effect moderate increases in home prices and mortgage costs would have on the average homeowner."

"Rising debt and elevated house prices have increased the vulnerability of a meaningful number of households, and their financial situation will worsen if interest rates increase even moderately," noted Sal Guatieri, Senior Economist, BMO Capital Markets. "With rates likely to remain low for some time, the recent tightening in mortgage rules will help to cool credit growth and the housing market."

Furthermore, Mr. Nel added that choosing a fixed rate mortgage and a lower amortization period can help Canadian households to increase financial stability. This echoed an earlier report by BMO Economics which noted that financial stability for Canadian homeowners in the coming years will be supported by locking-in to fixed rate mortgages and opting for shortened amortization periods.

BMO's first semi-annual report, conducted by Pollara, tracks confidence in Canada's housing market among Canadian homeowners by measuring intentions to buy or sell, price expectations and overall mortgage affordability. The report revealed:

Homeownership Intentions

  • GTA, Calgary and Vancouver: Intentions to buy in the Greater Toronto Area (57 per cent), Calgary (62 per cent) and Vancouver (53 per cent) within five years are outpacing the national average (46 per cent)
  • Size Matters: One in five (18 per cent) plan to downsize to a smaller home. The same percentage intends to up-size to a larger home
  • Exit Strategy: 10 per cent plan to sell their home and move in to a rental property, retirement community, or move in with family in the same time period
  • Real Estate Investment: One-in-five (21 per cent) plan to purchase an additional property for income, investment, or recreation

Effect of New Regulations on Buying Intentions

  • Just over half (57 per cent) are familiar with the new mortgage regulations introduced earlier in 2012
  • One-in-five (22 per cent) say they are less likely to buy a new home in the next five years because of the changes
  • Furthermore, 29 per cent planning to buy in the next five years say that they are likely to spend less on a new home as a result of the new rules

Price Sensitivity

  • Nationally, intentions to buy drop significantly from 46 per cent to 36 per cent in the event of a five per cent increase in home prices
  • In Ontario, intentions to buy would decrease by 13 per cent (52 per cent to 39 per cent) as a result of a five per cent increase in prices
  • In Alberta, a five per cent increase would change intent to buy by only 1 per cent; however, a 10 per cent increase would lower intent by 9 per cent, moving from 51 per cent to 42 per cent
  • A five per cent increase in prices in B.C. would lower intent to buy from 49 per cent to 39 per cent

Price Expectations

  • Nationally, homeowners in Canada expect prices to rise by 2.0 per cent over the next year
  • Across urban centres, those in the GTA expect prices to rise by 2.2 per cent, while those in Calgary expect an increase of 2.4 per cent
  • However, 27 per cent of Vancouver residents expect prices to decrease in the next year
National BC AB MB/SK ON QC ATL
12 Month Price Expectation +2.0 % +0.2 % +3.0 % +2.3 % +2.1 % +2.5 % +1.7 %

"Given that Vancouver is one of the priciest markets in the world, it's not surprising that many people expect some correction," said Mr. Guatieri. He added that while prices in Alberta should increase in the years ahead, prices in Vancouver and likely Toronto are poised to decline moderately; the Toronto decrease is contrary to the expectations of the majority of residents in the GTA.

Mortgage Affordability

  • One-third have cut back on big purchases and spending on entertainment (34 per cent and 31 per cent respectively) while one-quarter have reduced the amount they're saving over the past year to make their monthly mortgage payments
  • 17 per cent have dipped into their savings to make mortgage payments
  • However, while homeowners are nearly unanimous in their view that debt is a serious issue facing Canada (92 per cent), just 19 per cent feel household debt is a problem for them
  • 16 per cent of homeowners say a 10 per cent rise in mortgage payments would leave them at risk of not being able to afford their home

The BMO Housing Confidence Report was conducted by Pollara. Survey results cited in this report are from online interviews with a random sample of 1,011 Canadian homeowners, 18 years of age and over, conducted between September 13 to September 21, 2012. A probability sample of this size would yield results accurate to ± 3.1 per cent, 19 times out of 20. Data has been weighted by region, based on the most recent Census figures, so that it is representative of Canadian homeowners.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at July 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

To view the infographic associated with this press release, please visit the following link: http://media3.marketwire.com/docs/bmo1023infographic.pdf.

Image Available: http://www.marketwire.com/library/20121022-bmo1023info.jpg

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