Is this a good time to buy a home in Canada?

“Markets’ reaction [to the rate cuts] so far has been largely muted,” wrote RBC assistant chief economist Robert Hogue, in the bank’s latest economics report on housing. “It will clearly take deeper rate cuts to stimulate demand in a material way, as buyers continue to contend with high ownership costs and poor affordability.” 

With more rate cuts anticipated before the end of the year, MoneySense asked four experts to share their perspectives on whether it’s a good time to buy a home in Canada. Will improvements in mortgage affordability drive demand and lead to higher home prices? What other economic issues are at play? And how are high housing costs affecting different groups of Canadians, from first-time home buyers to retirees looking to downsize? Let’s see what the experts have to say, and what Canadians can expect.  

(Interviews have been edited for length and clarity.)

Is this a good time to buy a home in Canada?

An economist’s perspective:

David-Alexandre Brassard, MA, BA, is the chief economist for CPA Canada, which offers financial literacy to Canadians.

You’re not going to like my answer: Now is as good of a time as any. Because interest rates are starting to get cut, [mortgage rates] might be reduced faster than we thought. That’s what most economists are settling on. On the flip side, that means the economy is doing worse than we thought. Interest rates are forward-looking. Lending institutions have economists, such as myself, who forecast and estimate future interest rates. What most have in the cards is that rates are going to keep going down until late 2025.

So, your question boils down basically to: Will mortgage affordability improve in Canada? I don’t believe it will. What we’ve seen in Toronto and Vancouver specifically is that there’s more household wealth tied to housing. In 2019, that was already around 46% to 47% of net worth. Meanwhile, across Canada, it was closer to 34%. Over time, more and more of our wealth is being put in our home. And there are two problems with this: first, what you’re putting in your home, you’re not putting into your retirement; and second, there’s not that much room for housing price appreciation.

If you look at the price-to-income ratio across Canada, right now it’s at 8x. So, essentially, if you’re a dual-income household, the house is still going to be four times higher than what both of you are bringing in. If you’re looking at Vancouver and Toronto, it’s between 11 and 12 times. 

As interest rates are cut again and again, banks are going to allow households to borrow a bit more because the cost [of borrowing] is going down. And with the gap between housing demand and supply, prices will probably go up. It’s kind of crazy to think we’ve gone from a policy rate of 0.25% to 5%, and we’ve seen a drop in prices that was 10% to 15%. This means there’s an issue with housing supply.

I’ve been saying this for the last few months, but we don’t have an “inflation issue” the last eight months, we have a “housing issue” that’s creating inflation by itself.

So, now is as good a time as any, because home prices are not going down.

A financial planner’s perspective: 

Ayana Forward is an independent fee-only Certified Financial Planner at Retirement in View in Ottawa.

Downsizing is top-of-mind right now for a lot of Canadian retirees. Some of them come from big families, and now they’re empty nesters. They don’t need as much space. They’re also getting older. Having to maintain these large homes doesn’t make a lot of sense in a lot of cases. So, you’re seeing that uptrend in retirees wanting to move to more of a condo lifestyle or an apartment, where they can travel and not have to worry about who’s taking care of the home. 

There’s also that social aspect. My parents are a good example. They moved recently to be closer to us in Ottawa, and they’re in a retirement community that caters toward Boomers and retirees. They have all kinds of programs—pickleball, tennis, shuffleboard. That’s top-of-mind for a lot of my clients looking ahead. It’s not necessarily just “Is this the right spot for me now?”—they might still be in good health—but planning ahead before something happens.

The other thing is: do they need some of the equity in their home to be able to live if they haven’t saved enough? It might be more of a forced thing, where they can’t afford to stay where they are, or they need some liquidity to [attain] the spending levels they want once they’re no longer working. Another thing that comes up is do they want to downsize and rent instead—to not have the burden of owning the home, and potentially pre-gift inheritances to their adult children? That’s coming up a bit more than it used to, as boomers get older. 

It’s important to point out that behavioural things can be just as important as the dollars and cents. Can I sleep at night? What lifestyle do I want to have? Sometimes that can trump [other considerations]. 

A realtor’s perspective:

John Pasalis is president of Realosophy Realty in Toronto.

The latest rate cut isn’t going to have any immediate impact, at least for the fall market. But we’re seeing a gradual impact in the decline in fixed and variable mortgage rates. If we get another one or two cuts by the end of this year—which is expected—that’s going to have an impact on affordability. Mortgage rates will be quite a bit lower, making it a little easier for buyers to get into the market. 

We have a decent amount of inventory, so we’re not expecting a flood of buyer demand—just a slight increase. Things will probably be relatively balanced in the fall. We’ll see what the new year is like, but keep in mind that it will depend largely on what’s going on with the economy. Lower rates will stimulate demand, but if there are concerns about unemployment picking up and the economy not doing well, that could impact buyer sentiment, which could take some buyers out of the market. 

What I always tell buyers is that you don’t want to base your home-buying decisions on what’s going on in the market from one month to the next or one week to the next. It’s a long-term decision. Buy when you’re ready, and focus on buying the right home rather than trying to time the market perfectly. We don’t know if prices will be higher or softer in six months. You can’t control that, but periods when there’s more inventory and less competition are generally less stressful times to buy. Usually, the market in Toronto is quite frenzied, very competitive. In the past four or five months, things have cooled down.

Nationally, declining interest rates will move some buyers back into the market. Economic concerns will dictate how much that growth actually stimulates the market. We may see just modest growth if conditions worsen, which is partly why the Bank of Canada is cutting a little aggressively—they’re concerned about a weakening economy. 

A mortgage broker’s perspective: 

Ron Butler is a mortgage broker and founder of Butler Mortgage in Toronto. 

There’s no blanket answer [to this question]. The real estate market in Canada is very regional. In Toronto and Vancouver, it’s probably a profoundly shitty time to buy a condo, because those prices are only going to keep going down. But it’s probably a fine idea to buy a low-rise in Quebec or Alberta, or any province other than British Columbia and Ontario. 

It’s also a function of the [mortgage] product you’re looking at. With the certainty of continuous rate drops, we’re recommending variable rates again. People will end up with a mortgage rate of around 4% by the summer of next year. That’s probably as good as we’re going to get. So it’s a good time from a rate perspective.

In Ontario and B.C., they’ve essentially quit building new low-rises. For the last eight years, there have been fewer semis, townhouses and single-family homes [being built]. And it’s going to get worse. So, what we’ll have is a degree of scarcity moving forward. And that pushes prices up. But you have to question just how good the value is—particularly for first-time buyers.

As much as our urban planners want to push density—everybody needs to live in a high-rise—we’ve got millions of people in Canada whose perspective is: “I don’t want my aspirational home to be a high-rise. I want to live in a low-rise. That may not be financially possible, but it’s my aspirational goal.” And because we’ve developed such an enormous scarcity in [low-rise housing], that effectively puts a floor on pricing.

There’s another legitimate question for any home buyer right now: Do I jump in soon on the assumption that bidding wars will return and prices will go through the roof? Or do I sit back and wait until we get to the rock bottom of rates, because that enhances affordability? It’s incumbent on us to give honest answers, and the honest answer is, I don’t know. 

Here is a sample of the best mortgage rates in Canada right now.

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Read more about buying a home:

• Mortgage payments going up at renewal? Here’s what to do
• A parents’ guide to home down payment gifts and loans
• How much income do I need to qualify for a mortgage in Canada?
• Can you use the FHSA and HBP together?

About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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