Housing affordability remains very good, with the exception of the Toronto and Vancouver markets, says the BMO Spring Housing Affordability Report released March 22.
The Toronto and Vancouver markets are largely driven by the impact of millennial home buyers creating price increases in the condo and townhouse markets.
"Millennial buyers and international migrants are cushioning the decline in detached home prices in the hottest markets," said Sal Guatieri, senior economist, BMO Capital Markets. "We expect millennials to also bolster other markets like Montreal and Ottawa, as those looking for better affordability consider options beyond Toronto and Vancouver."
BMO says that beyond millennials, other factors affecting the housing market on a national scale include low unemployment rates and high population growth, as well as low interest rates, though they are expected to rise in 2018.
Rising interest rates
"It is likely we will see interest rates go up another 50 basis points this calendar year," said Guatieri. "Even these moderate increases will start to erode affordability for markets that haven't been much affected by tougher mortgage rules and other cooling measures."
"As homebuyers navigate the current market landscape, it is increasingly important that they are aware of all the factors that can affect affordability," said Martin Nel, head, Personal and Small Business Banking, BMO Financial Group. "This goes beyond regional regulations, and those planning to buy a home should speak to a mortgage specialist about pre-approvals and stress-testing which takes into account changes that could happen beyond when they make a purchase."