October 10, 2024: Canadian Home-Buying Intentions Being Pushed Out to 2025
According to the latest Canadian Maru Household Outlook Index (MHOI) that tracks Canadian consumers' views on their personal finances and economic outlook, "less Canadians say they will likely buy a house over the next 60 days (10% down from 13% last month). This returns to the lowest level of purchase intentions since March 2024 (10%). Those with the greatest propensity to purchase is down to its lowest level since February 2024 (from 6% to 4%)."
“Even a further 50-basis-point cut in interest rates may not prompt action from many Canadians, who might decide to wait for more favourable conditions, as the burden of down payments and mortgages continues to feel out of reach,” according to John Wright, EVP of Maru Public Opinion. John further noted that people are likely waiting to push their home-buying intentions past the next 2 BoC rate announcements and also awaiting the enactment of the policy changes on December 15.
Source: Maru Public Opinion
OUR TAKE
The current pace of the fall market does indicate that many consumers continue to be in a "wait-and-see" state of mind. If the past few years are any indication, we're likely going to see a much more renewed energy at the beginning of 2025. Also, keep in mind that any rate decisions (up or down) carry a bit of a lag when it comes to the impacts on the housing market. So assuming we continue to see further rate drops, the market will begin reflecting this approximately 3-6 months down the road. And if these observations continue to hold true, we believe there will be a flurry of activity come January 2025.
New Home Sales Continue to Struggle Despite Amortization Policy Changes
Mortgage changes will do little to spur demand for newly built homes, according to a number of large developers in the Greater Toronto Area. In August, the federal government announced a 30 year amortization period of newly built homes by first time home-buyers. However, a large majority of pre-construction homes especially condominiums are purchased by investors that don't qualify for this policy change.
“It will have a minimal impact,” according to Stephen Diamond, the founder and chief executive of Toronto condo developer DiamondCorp.
Source: Globe & Mail
OUR TAKE
We align with the developers' perspective that without enticing investors back into the market, sales of new and pre-construction homes are likely to continue struggling. Another key issue is the widening gap in price per square foot between new builds and resale homes, which has significantly reduced the motivation to invest in pre-construction properties at current cost levels. Additionally, with developers pulling back on launching new projects, we could face a serious supply shortage in the coming years as the population continues to grow.
It’s time to implement common-sense policies that encourage both local and foreign investors to re-enter the market. This would not only help stimulate immediate market activity but also contribute to a more sustainable long-term housing supply, particularly in Canada’s most significant metropolitan areas.
ALMOST MADE THE CUT
We're privileged to be your source of information and understanding of what's happening within our local economy and the real estate landscape. If you have any questions or would like to chat further, please don't hesitate to reach out.