As the winter months come to an end and the spring season begins, the Canadian real estate market is heating up. March is an important month in the Canadian real estate industry, as it marks the start of the busy spring buying season. With the warmer weather and longer days, Canadians are looking to make moves and capitalize on the prime real estate market conditions.
In this blog, we'll take a closer look at what's been happening in the Canadian real estate market throughout March. From housing trends to major changes, we'll cover everything you need to know about this pivotal month in the Canadian real estate industry.
Bank of Canada puts interest rate hikes on hold
In March, the Bank of Canada made a noteworthy decision by keeping its overnight interest rate unchanged for the first time in a year. This news was well-received, especially among homeowners with variable-rate mortgages who had been facing the brunt of the nine successive Bank of Canada interest rate hikes that had adversely affected the real estate market. However, the relief may be short-lived as the Bank of Canada has indicated that it remains open to the possibility of raising interest rates further later in the year, provided inflation rates remain high.
Inflation numbers came in better than expected
Rising interest rates are clearly having an impact on inflation. The rate for February was 5.2%, which was slightly better than anticipated but still falls short of the Bank of Canada's target of 2%. Nevertheless, the trajectory is positive, and significant strides have been made since the inflation rate reached a peak of 8.13% in June 2022.
Fixed interest rates drop
Following the collapse of Silicon Valley Bank, Credit Suisse and other regional banks, we saw a roughly 70-bps plummet in 2- and 5-year Government of Canada bond yields (which typically lead fixed mortgage rates) in just a two-week period. This has caused numerous mortgage lenders and brokerages to cut fixed mortgage rates, some by as much as 60 basis points, or 0.60%.Could this bring the certainly that buyers need in this market to make their move?
A million newcomers!
Canada’s population has grown by over one million people for the first time in history, with almost all of the increase due to international migration, according to Statistics Canada.The country’s total population now stands at 39.57 million, with a growth rate of 2.7%, which could lead to the population doubling in about 26 years. The increase is mainly due to the surge in immigrants and temporary residents, which has helped Canada retain its position as the fastest-growing G7 country.
Opening up the buyer pool with changes to the foreign buyer ban
In late-December, when the Government of Canada announced the guidelines around the Prohibition on the Purchase of Residential Property by Non-Canadians Act, better known as the Foreign Buyer Ban, the Real Estate and related industries had little time to implement a foreign buyer ban that was to be in effect as of January 1st, 2023.On March 27, 2023, the Government of Canada introduced a a series of amendments to the foreign buyer ban to expand the exceptions to the regulations and bring clarity to the act that has impacted buyers and industry professionals alike.The changes include allowing work permit holders to buy property (there were about 470K permit holders in Canada in 2022). Properties purchased for renovation purposes or land purchased for development can now also be purchased by foreign residents.
First-time homebuyers rejoice. A new tax-free service account kicks off April 1, 2023
While the date of it's release may have you thinking this is an April Fool's joke, the tax-Free First Home Savings Account (FHSA) is here to help first-time buyers get into the Real Estate market.Home affordability in Canada has been a significant challenge for first-time buyers. The high cost of housing in major cities, combined with low inventory levels and increased demand, has led to a surge in home prices. This has made it difficult for first-time buyers to save enough for a down payment, let alone afford a mortgage.The pandemic has further exacerbated the situation, with many Canadians experiencing job losses or reduced income. As a result, the dream of owning a home has become increasingly out of reach for many young Canadians, and policymakers are grappling with solutions to make housing more affordable.Enter the Tax-Free First Home Savings Account (FHSA)Part of the Liberal government’s 2022 federal budget proposal tackled the ever-growing issue of home affordability. They’ve introduced a new way to save up to $40,000 for your first home, tax-free, called the Tax-Free First Home Savings Account (FHSA).You can open your new Tax-Free First Home Savings Account from April 1, 2023 and it will allow Canadians who are at least 18 to save up to $40,000 for their first home.If eligible, you can contribute up to $8,000 each year to the account but you have to use these funds within 15 years of first opening an FHSA or before you turn 71 (whichever is earlier), otherwise the account would have to be closed.