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If your clients are house-hunting, they might require your help to stay within their budgets—especially in high-cost urban centres. And CMHC has an evidence-based tip clients can use.

A study from Canada Mortgage and Housing Corporation (CMHC) reveals that almost half (48%) of buyers in both Vancouver and Toronto spent more on their home purchases than budgeted.

Overspending isn’t the result of inexperience: both first-time buyers and repeat buyers report a similar likelihood of exceeding their budgets. (That finding is potentially important to note in light of new stress-testing implemented this year for those who don’t require mortgage insurance.)

Read: Amid rising rates, most Canadians don’t plan to stress-test their mortgages

Rather, CMHC’s hypothesis for overspending is fear of missing out in a market where prices are rising. Though the hypothesis can’t be confirmed with available data, CMHC finds that timing is critical.

Says the report: “Homebuyers in Toronto and Vancouver who reported buying a home before they anticipated or after they anticipated making a purchase were more likely to exceed their budget than homebuyers who did not alter their timing.”

Armed with that tip, clients might want to consider ahead of time how they’d handle a bidding war—common in tight markets.

For example, in both Toronto and Vancouver, 55% of buyers experienced a bidding war. That compares to 17% in Montreal.

In Toronto, a bidding war results in about a 20% increase in median home price, says the report.

Read: Why first-time homebuyers—especially millennials—are struggling

The effect in Vancouver, however, is the opposite, with the median price of single-detached homes 15% lower for buyers who experienced a bidding war. Says the report: “The bulk of bidding wars were reported in segments of the market where prices were below the median purchase price,” especially in apartment condomiums.

The study also reveals an erroneous perception of homebuyers: in Vancouver and Toronto, 68% and 48% of buyers, respectively, believe foreign investors have a lot of influence in driving up home prices.

Statistics Canada, however, reported last year that foreign buyers own only 4.8% of Vancouver properties and 3.4% of homes in Toronto.

Read: Non-resident condo ownership remains low: CMHC

For more details, including average and median purchasing prices, read the full CMHC report.

Also read:

What to look for as clients renew mortgages