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As more Canadians head back to their office cubicles, the rush of homebuyers retreating from major cities appears to be slowing down.

Results from a recent BMO Home Finance Survey show that interest in purchasing a home within a major city centre has jumped five per cent since last year despite concerns surrounding high real estate prices and record-level inflation. With more workers returning to offices, the preference for moving farther away from urban areas has declined over the past year while major cities continue to be the most popular location to buy a home, BMO said in its report.

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The online survey was conducted by Pollara Strategic Insights between mid-February and early March with 1,003 adult Canadians who plan on buying a home in the next 12 months.

“Market conditions are quickly changing. 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,” said Robert Kavcic, a senior economist with BMO Capital Markets, in the survey findings. “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 expect to pay $100k more than they did in 2021

In just the span of a year, homebuyers are expecting to fork over a larger chunk of change to buy a property compared to 2021.

According to the BMO Home Finance Survey, the amount buyers expect to pay for a house has surged $100,000 over the past year, a 26 per cent increase. On average, homebuyers across Canada are anticipating to pay $588,000 for a home.

Ontario buyers are expecting to pay the most this year, upping their budgets from $582,000 in 2021 to $790,000 in 2022, a $208,000 increase. Vancouver purchasers had slightly lower price expectations, having heightened their budget from $645,000 last year to $768,000 now, a $123,000 difference. Homebuyers in Atlantic Canada will likely pay the least for their home compared to the other major markets in the survey at an average of $355,000, but the amount buyers expect to pay for a home has jumped $132,000 from $223,000 in 2021.

Savings and housing costs have altered buying decisions

Savings activity during the pandemic and rising housing costs across the country have prompted a change in many buyer’s purchase plans.

Sixty-eight per cent of homebuyers said that they are willing to change how much they spend on the purchase of their home. Of the 73 per cent of those surveyed who stated that they are willing to spend more on their purchase, 55 per cent said it was because prices have gone up. Twenty-eight per cent said they would spend more on a purchase because their income has increased, while 27 per cent say it’s because they have more savings as a result of the pandemic.

When it comes to down payments, more than half (55 per cent) of homebuyers stated that they will use most or all of their increased savings towards their downpayment. Over one-third of purchasers stated they’ll have a down payment of 10 per cent or less, with more than two-fifths of buyers dependent on support from family to reach this amount. Fifty-two per cent of purchasers said they are using their increased down payment to spend more on their house and get a larger mortgage, a significant increase from last year when 20 per cent of respondents shared this sentiment.

According to Hassan Pirnia, head of personal lending and home financing products at BMO Financial Group, three-quarters of homebuyers anticipate the cost of homes will increase in the next year while 84 per cent of the survey’s respondents expect inflation to continue to rise.

“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,” said Pirnia.

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