FACTORS THAT ARE AFFECTING CANADA’S REAL ESTATE & HOUSING

DMM DEPARTMENT

MB Enterprises

Canada’s Real Estate & housing is currently dependent upon certain factors & these are the factors that will shape the housing market this year. A large number of homeowners list their houses for sale in the spring season. This is also known as the seasonal variation in real estate & housing. Obviously, there are many buyers who are amongst the ones looking to settle into new homes before the fall. These are ones faced by some key challenges that include the rate of inflation, the BOC or Bank of Canada’s benchmark rates, the mortgage rates, the housing supply, the rental market and the level of immigration.

The factors that affect the behaviours of buyers in real estate are as follows; month of January. The effects of inflation on food costs have shown a rise of 10% from last year. It is questionable by some economists & research analysts whether it’s even feasible, especially in the short term, to return to the inflation targets or the benchmarks that are set to 2%.

While depending on the inflation and the rate of inflation as well as the impact on the Canadian Banks in regards to the Silicon Valley Bank's failure, the Bank of Canada might have to break its rate pause promise, something which would further push down home prices.

THE HOUSING SUPPLY:

The housing supply is yet another factor that has affected low for a longer period of time. Some of the housing experts, in the meantime, have observed the return of the bidding wars in the major cities. Obviously, the buyers compete over a limited number of listings.

RENTALS:

Another factor that is affecting real estate & housing is the renters. This obviously means that the renters are having a tough time too. It was in the month of February, that the average advertised rent all over Canada was just shy of $2000. However, in the cities of Vancouver and Toronto, which are two of the largest Canadian city, tenants can expect to pay more than $2,500 monthly for a one-bed apartment. This is largely due to the high cost of renting today, which gives aspiring homeowners more incentives to buy. Thus, adding fuel to the housing markets while simultaneously limiting their ability for a home purchase.

IMMIGRATION NUMBERS- ‘Annual Immigration Targets’:

The immigration numbers contribute heavily to the factors affecting Canada’s Real Estate & housing. It was in the year 2022, especially in the later part of the year, that the Federal Government announced a plan that welcomed approximately 500,000 immigrants to Canada per year over the next three years. These are huge numbers, i.e. almost 23.5% more than increase the amount of new housing being built by 50% nationally through the year 2024.

HOUSING BUILDS- ‘According to Housing Targets’:

Yet another factor that is affecting Canada’s Real estate & housing is the number of annual housing builds. It’s the Federal & Provincial Governments who want to build new homes at a much faster rate to alleviate Canada’s housing shortages. However, the question still lies of how much housing we actually need? It’s the CMGC, i.e. Canada Housing & Mortgage Corporation which is the body that is responsible for housing & mortgage targets in Canada & how many homes need to be built on an annual basis. It was last year, 2022, that CMHC said that we need approximately four million homes built by the year 2030. They justified this by saying that this is important for the sake of restoration of affordability. Thus, as long as the rates of borrowing remain high, it will be difficult for the developers to build the amount of housing according to the targets.

THE MORTGAGE RATES:

Another factor affecting Canadian real estate & housing is the mortgage rates & currently, the variable mortgage rates are higher than the fixed rates. Under normal circumstances, the reverse is true; however, for now, the rates remain volatile.