It’s Not Just Politics… Other Expenses Keeping Canadians Away From Spending on Housing
The Future Looks Bright For Ontario?
In last Wednesday’s blog, we took a look at some of the factors that made the real estate market in Canada a difficult one to enjoy, and couldn’t put the blame on one thing in particular. It was not a particularly positive update to share, but at least things were made more sense of. This week, the news is a little better, and focused on one province only – our good ol’ Ontario.
The housing market in Canada’s most populous province is forecasted to grow over the next three years, albeit moderately.
“Population growth is still at about trend, or even slightly above trend, over the next three years and that’s because, even though the housing market is at times relatively unaffordable in the region as a whole, the economy is still attracting a lot of people for work and to education institutions, particularly in urban centres,” said Edgard Navarrette, an economist, who recent;y wrote a report.
He added that Windsor, London, Thunder Bay, and even Ottawa—a dense urban centre—will benefit from the First-Time Home Buyer Incentive offered by the Canada Mortgage and Housing Corporation because they’re still affordable. Conversely, the residents of the Greater Golden Horseshoe won’t benefit from the incentive because of the region’s exorbitant housing prices, even at entry level.
It’s not going to be all sunshine and rainbows, however. B-20 continues wreaking havoc for buyers in the Greater Toronto and Hamilton Area, where the First-Time Home Buyer Incentive will be negligible.
“Part of the reason they put this in place is to help people get into higher-density housing, but, unfortunately, with the program starting in September the increased demand for entry-level condos will start raising the prices in that segment, and you can expect bidding wars,” said Navarrette. “People will have to commute longer to find a home that fits their needs and their budgets, even with the CMHC First-Time Home Buyer Incentive program.”
The biggest issue with the First-Time Home Buyer Incentive, as was previously reported, is that users will qualify for less home. It’s almost a lose-lose situation.
“The number one issue facing first-time homebuyers is how much they qualify for, not the monthly payment after the home closes, and that’s what this is aimed at,” said James Laird, president of CanWise Financial, “They qualify for less if they use this program.”
On another note, the current trade difficulties between China and the United States could affect the Canadian economy, too.
“We’re also expecting the economy to slow down a bit over the next couple of years,” said Navarrette. “It won’t be below negative growth, but it will grow below trend because of our trading partners, not our economy. The U.S. has put in protectionist measures, which could slow down their economy, the global economy, and we’d be affected through trade channels, which will affect consumer confidence, business confidence, and business investment, as well as spending on big ticket items like cars.”
In spite of all this, it has been claimed that homeownership will increase between 2019 and 2021, but not all housing types will flourish because of strict lending conditions and a decelerating economy; the First-Time Home Buyer Incentive will drive modest growth that will filter through Ontario’s economy; and there will be very weak growth in new home construction until 2021, however, it will henceforth accelerate.
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