Will Real Estate Go NUTS In Canada? 🇨🇦

Summary

The transcript discusses the outlook for Canada's housing and mortgage market. Mortgage rates are expected to drop significantly, with variable rates potentially falling to the mid-3% range by spring 2025. There will also be changes in housing financing options, allowing larger down payments on high-value homes. However, the market remains divided: while small condos, especially in Toronto and Vancouver, face declining prices due to oversupply, low-rise homes and townhouses are scarce and likely to see demand increase. Investors are expected to face challenges with small condos, but family homes may stabilize or see slight price increases by 2025.

Takeaways

• 📉 Falling mortgage rates are expected, with a potential 50 basis point cut from the Bank of Canada soon.
• 🏠 Mortgage rates could drop to the mid to low 3% range by mid to late 2024.
• 💡 New policy changes will allow buyers to put 10% down on homes priced up to $1.5 million starting December 15th.
• 📊 The fall housing market is not expected to boom despite optimistic claims on social media platforms like TikTok and Instagram.
• 🏗️ There is an oversupply of small condominiums in Ontario and Vancouver, with many set to hit the market in the next two years.
• 📉 Prices of small condos are expected to fall further, as rents do not justify current prices, creating pressure for investors to sell.
• 💥 Investors make up a large percentage of the market, adding further strain on small condo prices.
• 🏡 There is a scarcity of low-rise homes like single-family houses, townhouses, and semi-detached homes due to a lack of new construction.
• 📈 While small condo prices may continue to drop, single-family and low-rise housing prices could firm up in spring 2025 due to limited supply.
• 🌍 The focus is on Ontario and British Columbia, which make up over 50% of Canada's population and are key drivers in the housing market.

Q & A

What is the expected trend for mortgage rates in Canada over the next few months?

Mortgage rates in Canada are expected to drop significantly, with variable rates possibly falling to the mid to low 3% range by late spring or early summer next year. This is anticipated due to aggressive rate cuts, including a potential 50 basis point cut by the Bank of Canada in the next meeting.

What impact will the December 15th changes to C8C limits have on the housing market?

The changes to C8C limits on December 15th will allow buyers to put a 10% down payment on properties priced up to $1.5 million. This is expected to generate interest from buyers, particularly for higher-value homes.

Why is the housing market in Ontario and British Columbia not currently booming, despite falling mortgage rates?

The housing market in Ontario and British Columbia is not booming due to high affordability challenges, economic uncertainty, and the fact that mortgage rates, although falling, are still much higher than the record low rates of 2021. The market remains slow despite some increased activity in certain areas.

What is the outlook for the real estate market in spring 2025?

The spring of 2025 may see some price firming, particularly for low-rise properties like single-family homes, townhouses, and semi-detached houses. However, the market for small condos, especially in Ontario and Vancouver, may continue to face downward pressure on prices.

Why are small condominiums in Ontario and Vancouver under price pressure?

Small condominiums are under price pressure because they are too expensive for investors, with high purchase prices and rents that don't cover the costs. As a result, some owners may become desperate to sell, leading to declining prices in this segment of the market.

What has caused the scarcity of low-rise homes in Ontario and British Columbia?

The scarcity of low-rise homes in Ontario and British Columbia is due to a focus on high-rise construction over the past eight years, with more than 50% of housing starts being condos. Additionally, new low-rise construction has slowed significantly in the past 14 months.

Why are investors less interested in buying small condos despite falling mortgage rates?

Investors are less interested in small condos because even with mortgage rates dropping to 3.5%, the high property taxes and condo fees make it difficult to turn a profit. Rent prices aren't high enough to justify the investment, leading to a loss for property owners.

What is the future outlook for people who overpaid for homes during bidding wars in 2021?

People who overpaid for homes during bidding wars in 2021, particularly in the outskirts of Vancouver and Toronto (the 905 region), have seen prices drop significantly, with some losing up to 25% of the value they paid. However, further price declines may be limited due to the scarcity of low-rise homes.

Why is the low-rise housing market expected to perform better than the condo market in 2025?

The low-rise housing market is expected to perform better than the condo market because there is a shortage of single-family homes, townhouses, and semi-detached homes, which remain in high demand. In contrast, the condo market is oversupplied, especially with small units that are less appealing to buyers and investors.

How has the lack of new construction in the Greater Toronto Area affected the housing market?

The lack of new construction in the Greater Toronto Area over the past 14 months has created a scarcity of housing, particularly low-rise homes. This has increased demand for the few available properties, which may help stabilize prices in this segment of the market, even as other parts of the market struggle.