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BMO Bank of Montreal

May 22, 2013 09:00 ET

REPEAT-BMO Housing Confidence Report: Reveals Surprising Regional Shift in Buying Intentions While Affordability Improves

- Buying Intentions: Vancouver and GTA homeowners most likely to buy, while intent dips in Calgary

- Price expectations: Most expect property values to increase modestly

- Mortgage affordability: Fewer mortgage holders making cutbacks to afford payments

TORONTO, ONTARIO--(Marketwired - May 22, 2013) - Despite cooling conditions in Canada's housing market, the BMO Housing Confidence Report released today shows nearly half of Canadian homeowners (48 per cent) intend to buy a property in the next five years - mostly unchanged from fall 2012 - signalling a high level of confidence in Canada's housing market is continuing into 2013.

However, regional data reflect a different story. In major city centres, intent to buy in Vancouver is on the rise, while Calgary has dropped by 13 points. Further east, buying intentions in the Greater Toronto Area (GTA) and Montreal have stayed steady over the same period. Provincially, Atlantic Canada has seen the largest increase in buying intentions, jumping by 15 points since the fall.

The report also reveals that perceptions of mortgage affordability have improved since the fall, with a 10 point drop in the proportion of mortgage holders making spending or saving cutbacks to afford their mortgage payments.

"The relative strength of the Canadian housing market continues to bolster homeowners confidence, while improving affordability across all regions reflects that Canadians are making responsible choices when it comes to financing a home," said Martin Nel, Vice President of Lending and Investments, BMO Bank of Montreal.

Mr. Nel added that for Canadians looking to buy a home - particularly first-time buyers - choosing a fixed rate mortgage and a lower amortization period can help to increase financial stability.

"The improvement in affordability reflects continued income growth nationwide and softer home prices in a few regions since the summer," said Sal Guatieri, Senior Economist, BMO Capital Markets. "That said, affordability remains an issue in the detached markets of Vancouver and Toronto, pushing more buyers into the condo market."

BMO's second 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

  • Vancouver Intent Rises, Calgary Falls: Intentions to buy in Vancouver have increased by 5 points since the fall (58 per cent versus 53 per cent) while intent in the Greater Toronto Area and Montreal has held steady (59 per cent versus 57 per cent). Meanwhile, plans to buy have decreased in Calgary by 13 points since the fall (39 per cent versus 52 per cent).
  • Under 40 Crowd Movin' On Up: Close to half of all homeowners under 40 intend to purchase a larger home within the next five years (46 per cent), and are three times more likely to move to a more expensive rather than a less expensive neighbourhood (24 per cent versus 8 per cent).
  • Real Estate Investment: 10 per cent of homeowners plan to buy a recreational property in the next 5 years, down 2 points from last fall. Furthermore, homeowners planning to buy an investment property have declined to 6 per cent from 8 per cent last fall.

Price Sensitivity Eases While Expectations Stay Mostly Flat

  • Nationally, sensitivity to price increases has lessened significantly. Intentions to buy would drop only 4 points in the event of a 5 per cent increase in home prices compared to a 10 point drop last fall. Over the next year, homeowners expect prices to rise by 2.0 per cent.
  • In Ontario, intentions to buy would not change as a result of a 5 per cent increase in prices. However, a 10 per cent swing would dampen plans to buy by 17 points.
  • Alberta appears to be the most sensitive region to price changes, where a five per cent increase in prices would result in a 12 point decrease in buying intentions, compared with only 1 point in the fall. Over the next year, Albertans expect prices to increase 1.9 per cent, down from 3 per cent in the fall.
  • A five per cent increase in prices in B.C. would lower intent to buy from 48 per cent to 39 per cent - statistically unchanged from fall 2012. In Vancouver, homeowners expect a price increase of 1.5 per cent compared to a decrease of 0.6 per cent in the fall. Furthermore, only 15 per cent expect values to drop - down from 27 per cent in the fall.
12 Month Price Expectations (Per Cent) National BC AB MB/SK ON QC ATL Mont GTA Cal Van
Spring 2013 +2.2 +1.2 +1.9 +3.0 +2.4 +2.2 +2.5 +2.5 +2.4 +2.1 +1.5
Fall 2012 +2.0 +0.2 +3.0 +2.3 +2.1 +2.5 +1.7 +1.4 +2.2 +2.4 -0.6

"In Vancouver, buyers seem eager to take advantage of the modest decline in home prices over the past year, while, in Calgary, strong price gains appear to have put some potential buyers on the fence," noted Mr. Guatieri.

Mortgage Affordability Improving

  • The total percentage of mortgage holders needing to cut spending or dip into savings to make their mortgage payments has decreased by 10 points since last fall (45 per cent versus 55 per cent).
  • Specifically, the number of mortgage holders making cutbacks to spending on big-ticket purchases has decreased by 9 points in the same period (25 per cent versus 34 per cent).
  • One-in-five mortgage holders have reduced the amount they are saving in order to afford their mortgage, down from 27 per cent in the fall.
  • 15 per cent have dipped into their savings to make mortgage payments, down slightly from 17 per cent in the fall.

The BMO Housing Confidence Report was conducted by Pollara. Survey results cited in this report are from online interviews with a random sample of 1,008 Canadian homeowners, 18 years of age and over, conducted between February 21 and 27, 2013. 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 personal and commercial banking, wealth management and investment banking products and solutions.

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