September 17, 2024: Two Substantial Mortgage Reforms Coming to Canada

The Canadian Federal Government has announced two key reforms aimed at making homeownership more accessible. Effective December 15, 2024:

Increased Price Cap for Insured Mortgages:

The price cap for insured mortgages will rise from $1 million to $1.5 million. This means Canadians will be able to purchase homes up to $1.5 million without needing to put down a 20% down payment (currently required for homes over $1 million). This change aims to help buyers, particularly in higher-cost markets, secure financing with a lower upfront burden.

Extended Amortization Period for First-Time Buyers and New Builds:

First-time homebuyers and purchasers of newly built homes will now be eligible for a 30-year amortization period, up from the previous 25-year limit. This extended period is designed to reduce monthly mortgage payments, making homeownership more affordable.

According to Finance Minister Chrystia Freeland, these reforms are intended to ease the financial pressures faced by younger Canadians and first-time buyers, while also encouraging builders to address the country’s housing supply challenges. The goal is to make homeownership more attainable without overwhelming buyers with high mortgage costs.

Source: Canada.ca

OUR TAKE

Considering that many of Canada's current mortgage rules haven’t been updated since 2012—while average home prices have more than doubled across the country during that time—we view these reforms as a welcome change for both first-time homebuyers and current homeowners looking to upgrade their primary residences.

The higher price cap for insured mortgages and extended amortization period will alleviate some of the financial strain, especially in high-cost markets, making it easier for Canadians to enter or move up in the housing market. Additionally, as interest rates continue to decline, we expect these changes to spur more activity in the housing market, as buyers and sellers feel more confident about navigating the current economic environment.

This shift is especially encouraging for younger generations and first-time buyers, allowing them to enter the market without the burden of extremely high monthly payments while also encouraging new builds and addressing the ongoing supply shortages.

Less Spas, More Space For Would-Be Condo Owners

According to the 2024 Canadian Multi-Residential Satisfaction Study (CMRS) conducted by real estate research firm SimplyDBS, 62% of surveyed residents expressed a preference for living in buildings with larger suites, even if it meant having fewer shared amenities. Similarly, a survey by Devron Developments found that 47% of Greater Toronto Area (GTA) residents consider condos a viable long-term housing option. Additionally, 53% of current condo owners are open to purchasing a larger unit to accommodate extended living, indicating a shift in preferences towards more spacious living environments.

Source: Financial Post

OUR TAKE

For city dwellers or young families, condos remain an excellent option, offering an active, turnkey lifestyle—especially in a city like Toronto, where many prefer to stay closer to the urban core. However, over the past decade, the focus on investor-driven developments has resulted in the construction of smaller, "shoebox" units, often catering to students and young professionals as rental properties.

While active condo listings have surged over the past 12 months, the demand for larger units remains strong but largely unmet. These surveys and studies highlight an important shift in resident preferences, emphasizing the need for more family-oriented and spacious units. Developers should take note of this evolving demand, as future projects that focus on building larger, more livable spaces could attract a broader and more diverse group of buyers.

This trend may serve as a signal for developers to rethink the balance between compact, investor-focused units and more expansive, family-friendly designs.

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