BMO Housing Survey: Over 40 Per Cent of First-time Home Buyers Believe Now Is a Good Time to Buy

According to a new survey released today by BMO, first-time home buyers generally have a positive outlook on the housing market.

The survey, conducted by Pollara Strategic Insights, found:

  • Across Canada, first-time buyers in Alberta are the most optimistic with over 50 per cent believing it is a good time to buy.
  • Home buyers in British Columbia and the Prairies are also fairly optimistic about the market (42 per cent in both regions).
  • Not all buyers share this same sentiment. Only a third of prospective buyers in Ontario believe now is the right time to purchase a home, and under 40 per cent of first-time buyers in Quebec believe the current market favours buyers.
  • Almost half (45 per cent) of new home buyers are looking to purchase in one of Canada’s hotter markets: Toronto, Vancouver, or Montreal.

According to BMO Economics, the housing market is showing signs of firming again and eight out of 11 of Canada’s larger cities are currently either buyer’s markets or balanced: Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, and Toronto. As well, the First-Time Home Buyer incentive is expected to provide a moderate lift to sales. Taken together, it is creating an environment of stronger consumer demand for housing.

The Home Stretch

When it comes to being able to afford a home, first-time buyers indicate that they are willing to stretch their wallets:

  • Nearly one in seven (13 per cent) first-time home buyers are planning to buy a property which exceeds more than 30 per cent of their income.
  • Close to 40 per cent of first-time buyers are willing to make sacrifices in other areas of their lives to buy a more expensive home.
  • First-time buyers are also optimistic when it comes to the federal government’s First-Time Home Buyers Incentive. Of those surveyed, 86 per cent believe that the incentive will be useful towards achieving their home ownership goals.
  • Older millennials – those currently in their 30s – are one of the groups to find the new incentive very useful (50 per cent).

“While first-time home buyers believe that market conditions are favourable for buyers, it’s important to make sure that carrying the costs are sustainable,” said Hassan Pirnia, Head, Personal Lending and Home Financing Products, BMO Bank of Montreal. “What we recommend is coming in and speaking with a mortgage specialist to come up with a plan that will put the buyer in a position to comfortably afford a home and help them understand the criteria for qualifying for the new incentive.”

The down payment challenge

As more Canadians look at the possibility of home ownership, many suggest that they will struggle on the down payment. With a five per cent down payment as the minimum, over a quarter (26 percent) of first-time home buyers say having enough money to meet this threshold will be a major challenge, while 39 per cent indicate it will be a minor challenge.

The report also pointed out that prospective home buyers range in financial preparedness. Only 14 per cent of new home buyers are already in a position to make a down payment, and over half (55 per cent) say they expect to have the money for a down payment in the next two years. As well, most first-time buyers will be carrying debt into homeownership. Just over one third of new home buyers (38 per cent) say they will be debt free before they purchase their first home.

“Purchasing a home is a major milestone, but it is important to consider how home ownership will impact day-to-day finances and short-term and long-term financial plans,” noted Mr. Pirnia. “We encourage new homebuyers to familiarize themselves with the various tools and resources available like BMO’s payment and affordability calculators. They will help to provide a full picture of costs and determine financial comfort levels.”

Tips for First-time Buyers

  • Mortgage pre-approval: As a first-time buyer, it’s a good idea to get pre-approved for a mortgage to ensure you have the time to do your due diligence during the home buying process. BMO now offers a 130 day mortgage rate guarantee period, the longest of any of Canada’s major financial institutions.
  • How much to spend: It’s important to come up with a budget to determine how much you can spend on mortgage payments each month. Within that budget, remember to account for everyday life expenses outside of the cost of your home. A good rule of thumb is to not spend more than 30 per cent of your monthly income on housing.
  • Closing costs: Closing costs – things like land transfer tax and title insurance – are part of the upfront costs you need to pay when buying a home. You’ll want to set aside about 1.5 per cent of your home’s purchase price to cover closing costs.

For more information on mortgage options and affordability tools or to connect with a BMO mortgage specialist, visit: https://www.bmo.com/main/personal/mortgages/.