Showing Signs Of Recovery
The Canadian housing market is showing signs of recovery, with pent-up demand expected to drive more home sales in the coming months. However, TD economist Rishi Sondhi warns that this surge in activity won’t last indefinitely, projecting that the rush will likely subside by the first half of next year. While the initial wave of demand should push housing prices higher, Sondhi notes that large supply backlogs, particularly in Ontario and British Columbia, will continue to weigh on the market and take time to resolve. As demand outpaces supply, home prices are likely to rise in the short term.
New Mortgage Rule Changes And Interest Rates
Additionally, there are factors that could further support the housing market in the coming months. Falling interest rates and recent federal mortgage rule changes, which took effect on December 15, are expected to give a boost to both home sales and prices. Among the key changes are an increase in the maximum mortgage amortization period for first-time buyers from 25 years to 30 years, as well as a rise in the insured mortgage cap from $1 million to $1.5 million. These measures, coupled with the potential for continued economic growth, should help sustain the housing market’s momentum. According to TD’s forecast, home sales across Canada are expected to rise by 16 percent in 2025, while the average home price could increase by 8 percent.
For homebuyers, recent policy changes have improved affordability, particularly in light of the national banking regulator’s decision to eliminate the stress test for uninsured mortgages. As of September, the Office of the Superintendent of Financial Institutions no longer requires lenders to apply the minimum qualifying rate when borrowers switch their mortgages to a different institution, provided their loan amount and amortization schedule remain unchanged. Ratesdotca’s mortgage expert Victor Tran believes these changes will contribute to a hot spring market in 2025, as more buyers take advantage of the improved conditions.
In Vancouver, housing affordability is showing slight improvement, although challenges remain. The Royal Bank of Canada’s December 2024 report notes that rising household incomes have helped ease some of the affordability strain, and home prices in the region are stabilizing. However, despite these gains, affordability in Vancouver remains an issue, with 96.7 percent of the median household income required to cover homeownership costs in the third quarter of 2024. This is in stark contrast to other Canadian cities, such as Calgary (42.2 percent), Edmonton (33.6 percent), Ottawa (47.3 percent), and Montreal (49.4 percent). While the Bank of Canada is expected to cut interest rates further in 2025, which could lower homeownership costs, RBC’s Robert Hogue cautions that any significant price increases in Vancouver would be a setback, making it even harder for average households to afford a home.
Overall, while the Canadian housing market is poised for a stronger 2025, the recovery will be uneven, with regional disparities in affordability and supply challenges continuing to shape the landscape. The interplay of interest rates, federal policy changes, and local market dynamics will play a key role in determining how the market evolves in the months ahead.
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Details provided by The Canadian Press & Business Intelligence for BC
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