BMO survey reveals where first-time buyers are most confident

In spite of a bumpy economic landscape, Albertans buying their first homes have the most confidence in their real estate market, according to a BMO survey.

Conducted by Pollara Strategic Insights, over 50% of first-time buyers in the province expressed optimism and believe now is a good time to buy. Forty-two percent of respondents in both British Columbia and the Prairies are fairly optimistic.

However, a mere third of Ontarians believe jumping into the market now is a good idea.

“While first-time homebuyers believe that market conditions are favourable for buyers, it’s important to make sure that carrying costs are sustainable,” advised Hassan Pirnia, BMO’s head of personal lending and home financing products.

Forty-five percent of new homebuyers are looking in Canada’s three hottest markets—Toronto, Vancouver and Montreal—which could prove cumbersome as they scrape enough money together for a down payment. Twenty-six percent of respondents said coming up with a 5% down payment will be a major challenge, while 39% called it a minor challenge.

Only 14% of new homebuyers are even prepared to buy a home, but 55% say they will be ready in a couple of years.

The survey also revealed that the overwhelming majority of first-time buyers will carry debt into their home purchase, as only 38% say they will be debt-free.

“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,” said Pirnia.

The First-Time Home Buyer Incentive—in which the Canada Mortgage and Housing Corporation takes an equity stake in the buyer’s home—also came into effect last week, and while it won’t help Toronto- and Vancouver-based buyers, it should help purchasers in smaller markets, says Robert McLister, mortgage editor of Rates.ca and founder of Ratespy.com.

“If you’re a first-timer buying a house and don’t expect you’re going to live in this house for a long time, especially in a housing market with weaker demand, this could potentially save you more on interest and default insurance premiums than you give up to CMHC,” he said.

“Who it’s not for is someone who plans to live there for a long time, especially in a housing market that’s hotter and has stronger fundamentals,” he said. “In that case, it could cost you more in the equity you give up than what you save on interest and default insurance premiums.”

MBN

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