For the last couple of years, Canada’s housing market has experienced gradual disinflation, despite the implementation of policy interventions looking to cease the deterioration in affordability in Toronto and Vancouver. Overall, affordability at the national level has yet to improve. But this is not surprising considering the significant increases in the average mortgage rate over the past two years, which has made it difficult for any reforms to trigger improvement in affordability.

If you’re considering buying a home or investing in property, then you should first check out the housing and real estate trends for the year and beyond, especially concerning home types, real estate mortgage rates, and whether this is still an excellent year to buy your dream home.

Affordability Relief

The falling home prices across the country are probably due to the government’s efforts to aid the Toronto and Vancouver markets, though government decisions made federally affects the entire country. The average share of income required to cover homeownership costs have dropped a little, with a national average of 51.9%, compared to 84.7% in Vancouver, 66.1% in Toronto, 44.5% in Montreal, 40.6% in Ottawa, and 40.3% in Calgary.

The lower property values contributed largely to the affordability relief, though prior interest rate hikes, the mortgage stress test, and policy tightening have pushed many prospective buyers to the sidelines. Flat home price growth over the year may also result in more relief for home buyers, especially if household income increases as expected.

Pause in Demand

Policy interventions have attempted to directly affect affordability by decreasing demand rather than slowing price growth. The fiscal 2019–2020 budget contains two demand-side interventions designed to assist first-time homebuyers. The first is an increased ceiling from C$25,000 to C$35,000 on withdrawal from retirement savings so they can make a down payment, and the second is shared equity mortgage with Canada Mortgage and Housing Corp.

That said, these interventions do not apply to areas like Toronto, where median prices are too large to make down payments affordable for most first-time homebuyers. Additionally, the policy measures only apply to a specific range of eligible incomes, and the value of the home that they can purchase is also limited.

Buying a Home in 2019

2019 is a great time to buy a home for several reasons. According to the Calgary Real Estate Board, there’s a 2.45% decrease in home prices, and the effect should be greater following the election and new controls. But many people have been reluctant about buying property as they wait for the prices to keep falling further, or “time the bottom.”

Economists claim that the worst may be over with regard to the housing market policy interventions, though some checks are expected from the Bank of Canada rate hikes over the next couple of years to prevent the slow down in sales and residential construction from dragging on the economy.

Analysts identify the current cooling of the markets as a necessary consequence to keep mortgage debt service-to-income ratios fair and ensure sustainable affordability. They also recommend buying a home they can afford, and investing in the right size of property that they need now rather than later.

For more information on trends in real estate mortgages, call Northwood Mortgages at 866-307-0747 or contact us here.