Is it a Good Time to Buy a House for the First Time?

Let’s be honest: There is a lot of uncertainty in the current Canadian real estate market. Are home prices climbing, rising, or stagnating? Where will mortgage rates be by the end of the year? Will economic conditions improve as 2024 progresses? Indeed, there are many variables that buyers and sellers need to think about as they navigate through all the noise in the housing sector.

Research has shown that Canadian households understand that buying a home, whether a single-family house or a condo, is one of the best financial decisions you can make in your life. This is why young households are often encouraged to set their sights on home ownership, no matter what the current housing landscape looks like.

Put simply, now could be a terrific time to buy a house for the first time. Let’s comb through the various ways that buying a home in today’s climate could be advantageous for you and your family.

Is it a Good Time to Buy a House for the First Time?

Here are four factors to show that now is a good time to buy a house for the first time:

Mortgage Rates Will Come Down Soon

Unless Canada’s inflation rate dramatically reaccelerates, interest rates will come down soon. The Bank of Canada (BoC) has already said as much, though monetary policymakers are monitoring the real estate market out of precaution. That said, the consensus among economists and market watchers is that the central bank will soon pull the trigger on a quarter-point rate cut and slash rates by a full percentage point by the year’s end.

What does this mean for homebuyers? Mortgage rates will follow suit. Since August 2023, the conventional five-year fixed mortgage lending rate has been above six per cent. If the monetary authorities have successfully vanquished inflation in the Canadian economy and move ahead with loosening monetary policy, the cost of borrowing a mortgage could gradually slide below six per cent. This could potentially save buyers thousands of dollars over the course of the term, particularly if borrowers shop around for the best terms and conditions.

Government Incentives

All three levels of government have put forward incentives to foster more home buying among first-time buyers. While some of these programs might not result in substantial savings for households residing in hot real estate markets like Toronto and Vancouver, they can undoubtedly provide significant savings for people living in Manitoba or Nova Scotia.

Here is a breakdown at the federal level:

• Home Buyers’ Plan (HBP): Canadians are eligible to tap into their registered retirement savings plans (RRSPs) to buy a home. Borrowers can withdraw up to $60,000.
• Tax-Free First Home Savings Account (FHSA): Borrowers can make tax-deductible contributions of up to $8,000 per year for a lifetime maximum of $40,000.

In addition, Ottawa has implemented other tax credits and rebates to help address housing affordability challenges.

Across the country, provinces have established a treasure trove of grants and incentives to help first-time homebuyers confidently trek the real estate market. In Ontario, for instance, there is the Land Transfer Tax Refunds for First-Time Homebuyers. In British Columbia, there is the First-Time Home Buyers’ Program. Or, in New Brunswick, officials have established the Home Ownership Program.

At the municipal level, there are various initiatives to construct more housing.

Ultimately, all of these programs will help first-timers take the leap into home ownership and potentially get more of the home features that they desire, such as more square footage or their desired location.

Brace for a Soft Landing?

Inflation has impacted millions of Canadians. While the consumer price index (CPI) is still hovering close to three per cent – above the central bank’s two-per-cent target rate – disinflation has been prevalent, and the increases have not been as fast and furious. As for the rest of the economy, conditions have been relatively slow. The last time the monthly GDP rate hit one per cent was in August 2020.

According to S&P Global, GDP growth in Canada will continue to be sluggish in the coming months, with the real GDP rate coming in at 0.9 per cent in 2024. TD Bank forecasts that long-term growth is anticipated to decelerate to around 1.8 per cent annually. “This will be driven by solid population and labour force growth, while productivity growth lags behind,” the bank stated in its report.

The good news? Canada might avert a recession, which would also suggest that the employment situation does not deteriorate. Of course, this is good news for first-time homebuyers as they can have the confidence that their labour situation will not worsen, forcing borrowers to eat into their savings until they find other employment opportunities.

While economic conditions can change on a dime, many market observers are confident that Canada could accomplish a soft landing, a situation whereby growth is intact, labour market remains solid, and inflation is eradicated.

Stagnating Price Growth

Housing market conditions have stabilized in Canada. In other words, the real estate industry has not witnessed the violent price swings that occurred a few years ago. For instance, the Canadian Real Estate Association (CREA) reported that the MLS® Home Price Index (HPI) dipped 0.3 per cent monthly in March and was up just 0.7 per cent year-over-year. While the national average home price is higher than the pre-crisis level – in March, it was nearly $699,000 – the acceleration has slowed.

All About Supply

In the end, supply will define the Canadian real estate market in the coming years. With Canada’s population only growing amid rising immigration levels, demand will undoubtedly be baked into the cake. But will the country respond to these conditions and start building more supply? There is growing optimism that home construction plans by the government and the industry’s response to the pressing need for millions of new homes over the next decade will help bolster the Canadian real estate market. The future is bright, and other homebuyers realize a hopeful future is in the realm of possibility.