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Intent to buy among home owners in Vancouver climbed by 5 points. (Rafal Gerszak For The Globe and Mail)
Intent to buy among home owners in Vancouver climbed by 5 points. (Rafal Gerszak For The Globe and Mail)

Mortgages

Slowdown? Nearly half of Canadian homeowners eager to buy property Add to ...

Undeterred by record-high housing prices and bolstered by low borrowing costs, nearly half of Canadian home owners plan to buy a property in the next five years, although intentions vary sharply from city to city, a poll released Wednesday has found.

According to a Bank of Montreal survey, 45 per cent of Canadian homeowners surveyed this spring are looking to buy a place in the next five years, a level that did not change from the fall of 2012. The percentage of homeowners planning to buy in the next year also remained stable, edging 1 per cent higher to 7 per cent.

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Canadians in Calgary were least eager to buy, with intentions there dropping by 13 points from the fall of 2012 while those in Atlantic Canada were the most eager, with buying intentions rising 15 points. Intent to buy among homeowners in Vancouver climbed by 5 points and in Toronto by 2 points.

Bank of Montreal economist Sal Guatieri attributed the perception of improved affordability to rising incomes. “Job growth has been decent in the last year, so income has been rising,” he said in an interview. In addition, he noted that the runup in house prices is slowing.

“In Calgary, house prices have picked up... because people are moving to that city and taking advantage of the oil sands,” he said. “Valuation is pretty good in Calgary,” he added, where house prices have gone through a correction after peaking in 2007.

However, Mr. Guatieri said that in the detached home markets in Vancouver and Toronto, affordability remains an issue and high prices are forcing buyers into the condo market. Prices in Vancouver have dipped recently, he said, but for most people it is still “very pricey” to buy something in that city.

House prices hit an average national record high of $380,588 in April, according to the latest data from the Canadian Real Estate Association.

Despite fears of a major slowdown similar to the one that triggered a recession in the United States, there are signs that Canada’s housing market is headed for a soft landing. Sales this spring are forecast to edge higher, putting an end to years of frenetic activity and huge price gains.

“The housing market in most regions is still very affordable, because of low interest rates – that is why people are still buying,” Mr. Guatieri said. “Going forward, we expect prices to stabilize. And of course cities that are richly priced, they are vulnerable to price corrections.”

John Andrew, a real estate professor at Queen’s University in Kingston, Ont., said the high cost of real estate transactions make it unlikely that nearly half of all Canadian homeowners will make a move in the next five years.

“A lot of people do not realize how high the fixed costs of moving really are,” he said. Once you factor in real estate commission fees, lawyer costs, land transfer taxes as well as the cost of the actual move, it adds up to a “staggering number.”

And although interest rates are still low, they might not be five years from now, Prof. Andrew added.

The online interviews of 1,008 Canadian home owners conducted by Pollara for BMO in February asked them about intentions to do with buying or selling their primary or secondary properties, price expectations, and mortgage affordability.

Here are some of the findings: 16 per cent of those polled plan to buy a larger home as their primary residence while 21 per cent plan to buy a smaller home; 15 per cent plan to move within their current neighbourhood while 12 per cent intend to move to a more expensive one and 7 per cent to a less expensive one; 10 per cent plan to buy a recreation property like a cottage; 10 per cent plan to buy an income property to rent to tenants and 6 per cent intend to buy an investment property to flip.

Lastly, 10 per cent of homeowners plan to sell their home and move to a rental property, retirement community or in with family, according to the poll.

Among those surveyed, 7 per cent expect house prices will fall over the next year, 32 per cent said they will stay the same and 53 per cent said they expect them to rise. The remainder said they did not know.

The BMO survey also asked homeowners if they have cut back their spending or dipped into their savings to make their monthly mortgage payments. It found that the number of people who needed to do so has fallen 10 points from last fall to 45 per cent this spring.

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