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TORONTO, ONTARIO--(Marketwired - Dec. 5, 2013) - Canada's largest housing market - accounting for 19 per cent of national sales - continues to defy concerns of a correction, according to a new report from BMO Economics on Canada's major housing markets.

The report titled "Canadian Housing Update: Tale of Four Cities" examines the state of the housing markets in Canada's four largest cities: Vancouver, Calgary, Montreal and Toronto.

"Across Greater Toronto, sales are up 20 per cent year over year in the three months to October, and stand 9 per cent above past decade norms," said Sal Guatieri, Senior Economist, BMO Capital Markets. "While preliminary figures show sales slowed in November, markets are generally balanced; but sellers rule and bidding wars prevail in certain pockets. Benchmark prices have picked up to an above 4 per cent pace, and, at over six-times median family income, remain lofty."

The report shows that after plunging last year, new condo sales have firmed but remain well below the past decade norm. "Condos are an affordable alternative to the detached market for the more than 80,000 international migrants moving to the region each year and the growing number of young people leaving their parents' basement," stated Mr. Guatieri. "While low rental vacancy rates have kept resale condo prices near record highs and rents on an upward course, prices of new condos have weakened modestly in the face of a record number of units under construction - close to 60,000."

According to the report, investors who have purchased roughly half of new condos in recent years could get antsy if rents flatten out or prices soften further. However, most of the new units coming on stream should be absorbed by robust population growth.

Mr. Guatieri concluded that the looming supply of condos, high valuations of detached homes, elevated levels of household debt and expected higher interest rates should slow overall price increases in 2014, even as new immigrants and echo boomers provide support. "We expect Toronto house prices to stabilize in 2014, and to remain at risk of declining moderately when interest rates normalize."

Andrew Auerbach, Senior Vice President, Greater Toronto Area, BMO Bank of Montreal, recommended that those looking to buy in the pricey GTA market should take measures to ensure affordability can be maintained over the long term.

"In light of the potential for higher interest rates in the near future, it's crucial that those looking to buy a home - particularly first time buyers - stress-test their mortgage against a higher rate to ensure they can afford what they sign up for should conditions change," said Mr. Auerbach.

BMO Housing Market Scorecard for Four Major Cities and Canada

The full report, featuring the complete and sourced version of the scorecard above, can be downloaded at bmocm.com/economics.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $537 billion as at October 31, 2013, and more than 45,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.