Canadians’ interest in home purchases in major city centres is on the rise, according to a BMO survey that cites employees’ return to the office.

"Market conditions are quickly changing," said Robert Kavcic, Senior Economist at BMO Capital Markets. "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. Longer term, underlying fundamentals are still strong thanks to a firm job market and demographic support."

Buyers’ attitudes have indeed changed as the pandemic nears its conclusion. Sixty-eight percent of homebuyers are willing to change how much they spend on their hoe, while 73% willing to pay more, of whom 55% said it’s to be able to participate in the country’s highly competitive housing market, 28% said it’s because they have more income, and 27% reported it’s because the pandemic allowed them to save more money.

Fifty-five percent of homebuyers surveyed by BMO said they would use most or all of their increasing savings on a down payment, while 52% reported using their larger down payment to buy a bigger house with a bigger mortgage—up substantially from 20% in BMO’s 2021 survey.

Additionally, more than a third of respondents will be using down payments of no more than 10%, and two-fifths said they would rely on familial help for their down payments.

Home Prices Surge Across Canada

The BMO survey also determined that the expected amount for a home purchased has increased by $100,000 over the past year -- a 26% rise -- with Canadian homebuyers anticipating paying an average of $588,000.

British Columbians expected to pay an average of $645,000 in 2021, but this year that number has swelled to $768,000, but there’s a wider chasm in Ontario, where homebuyers anticipated paying $582,000 last year and $790,000 in 2022. In Quebec, Canada’s second-most populous province, homebuyers expected to pay $374,000 last year and $454,000 this year.

The survey also said 30% of respondents who are actively searching for homes have secured pre-approvals.

"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 & Home Financing Products at BMO Financial Group. "Three-quarters of homebuyers expect the cost of housing to continue to increase in the next year; four-fifths (84%) expect inflation to continue to rise and three-quarters expect further interest rate increases. 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."

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