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Housing prices in Canada have risen by an estimated 18 per cent over the past four years.

Yet, far from slowing the buying frenzy, a new BMO survey found many house hunters remain eager to stay in the market, even if it means digging deeper into their wallets to secure their dream home.

Most, 86 per cent, of home buyers said house prices have gone up since they first started looking, according to the survey. For one in four Canadian house hunters that means they expect to pay about 21 per cent more for a new house — an increase of $83,556 – above what they had originally budgeted.

That gap is even larger in Calgary and Vancouver where a frothy housing market has about half of all buyers anticipating additional costs of between $80,000 and $90,000 over their original price points. In Toronto, a demand for detached or semi-detached homes continues to outstrip supply and could tack as much as $107,000 more onto the final price tag — a jump of 20 per cent up from what most (60 per cent) buyers had set aside.

Kate Watson, a realtor with Bosley Real Estate in Toronto, said most buyers are well informed when they come into the market and know what they want to spend. But a shortage of housing stock, particularly detached and semi-detached homes in central urban neighbourhoods, has led to heavy competition and, in some cases, dramatically inflated prices over what may have been anticipated. Bidding wars are common.

“If you get 20 showings on a property in a week, that is a slow week. In a lot of cases you will have 70,” Watson said.

Sal Guatieri, senior economist with BMO Capital Markets, agreed that it’s disproportionate demand, not ignorance of the market, that is stretching affordability limits of many home buyers.

In Calgary, home prices have risen by as much as 10 per cent over the last year and continue to climb based largely on an influx of residents to the city and a lack of available housing.

In Vancouver, Guatieri said, many families of average income have dropped out of the housing market because it is already too high. Most of the bidding wars are at the very high end and in certain neighbourhoods, driven largely by wealthy newcomers to the city.

Watson estimated that housing prices in central Toronto have risen between 10 and 15 per cent over the last year.

Affordability and availability is also driving a spike in interest in townhomes, the BMO study found. The majority (55 per cent) of potential home buyers said they are looking at townhomes as a way of getting into the market while staying true to their dream of having a backyard.

The study found many as much as 76 per cent of buyers are concerned the condo market is overdeveloped and that a condo will not hold its value compared to a detached, semi-detached, or townhouse.

Guatieri said there is no evidence the condo market is saturated. In Toronto, homebuilders are still selling more condos than detached homes, he said.

Demand in Vancouver remains steady, while in Calgary “builders can`t even keep up with demand in that city,” he said.

Guatieri said condos have held their appeal largely because they remain within reach. In Toronto, for example, a typical family in a condo can expect to pay about 23 per cent of its income to service the mortgage. For homeowners, that mortgage debt will take closer to 50 per cent of the total income.

Using the same calculation in Vancouver, a mortgage on a condo will absorb about 28 per cent of the average family income, while a single-family home will require about 78 per cent.

Watson said there is a growing demand among buyers of all ages to live in or near Toronto`s downtown core and that is helping to maintain strong condo sales.

“Toronto is just getting better and better. It is really on a role,” she said. “Now it is vibrant and fun and there are lots of restaurants and shops opening up. It is filled with young people and there is nothing better than a city where the demographic is young.”

National home sales activity rose nearly two per cent from July to August this year, according to the most-recent housing data published by the Canadian Real Estate Association. The data marks the seventh consecutive monthly increase and the highest level for sales since January 2010.

The average sale price was up 5.3 per cent in August compared to 12 months earlier, the associated reported.

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