Plenty of potential new buyers are still sitting on the sidelines, but many who want to move are seeing conditions shift in their favour
Economic headwinds are weighing on the outlook for Canada’s housing market, pushing plenty of potential homebuyers to the sidelines and exerting continued downward pressure on prices.
In most markets, that’s bad news for anybody hoping to sell their home in the months ahead, likely reducing the number of prospective bidders for their property and keeping their expectations for sale price in check.
But the continued slide in prices represents good news for homebuyers determined to push ahead with their purchase – especially those buying for the first time.
During the COVID-19 pandemic, new entrants to the market faced a frustrating battle to get their foot in the door. Ultra-low interest rates and pent-up savings sparked a homebuying frenzy between 2020 and 2022 marked by intense bidding wars and offers soaring well above list prices.
New environment a gamechanger for some hopeful buyers
Even though rates are on the rise, a much cooler market – and lower prices in many cases compared with four to six years ago – have suddenly changed the outlook for Canadians who had saved for their downpayment but were unable to compete with multiple offers on the properties they wanted.
Sarita Free, a mortgage agent with Mortgage Powered Financial Group based in Norfolk County, Ontario, told Canadian Mortgage Professional that 2025 and this year had been a gamechanger for first-time buyers hoping to enter the market in her area.
The milder homebuying environment and programs like an extended 30-year mortgage amortization option have seen the outlook brighten considerably for younger Canadians who were previously frozen out, according to Free.
That’s not to say first-time buyers are suddenly streaming into the market. Plenty still say waiting is the right option, especially with the sluggish current pace of activity unlikely to pick up anytime soon. But Free said those who were previously determined to buy, but couldn’t, are now able to push ahead.
“A lot of my clients are first-time homebuyers and they’ve finally been able to break in,” she said. “This year, I’m finding that they’re finally able to get into the market. With the 30-year amortization that we can now go to, I find a lot of my buyers that have been on the sidelines are finally able to… stay in their hometown where they’ve grown up, and not have to go elsewhere.”
That’s a stark difference, she added, from the dispiriting environment of the pandemic. “A couple of years ago when there were multiple offers and bidding wars, it was so disheartening to have these conversations with people whose families have been in our counties for decades, and them not being able to break into the market,” she said. “So this year has been really heartwarming, and last year too.”
How long will home affordability improvements last?
Across Canada, home affordability improved in 10 of 13 major markets in August, according to Ratehub.ca’s latest Home Affordability Report, meaning buyers in those cities needed less income to qualify for a mortgage than the previous month.
But Ratehub’s vice president of mortgages Jamie David suggested that the affordability window for hopeful buyers may be closing. Recent rate jumps, she said, “show how important it is to secure a rate hold amid the current market volatility.”
Expectations of Bank of Canada interest rate hikes have risen in recent weeks while bond market volatility has pushed five-year Government of Canada bond yields – which heavily influence fixed mortgage rates – higher.
That suggests borrowing costs could be about to creep upwards, even if prices remain stagnant or dip slightly.
For now, though, buyers are faced with a promising environment in many markets – and they have room to negotiate, too, compared with years gone by.
“I don’t see bidding wars. And when [sellers] do that little trick where realtors price a house really low [to entice more offers], that does not fly where I’m from,” Free said. “They’ve got a little bit of time to weigh up their offer and see the property, which is great.
“Conditions of finance are back in. Home inspections, everything, you name it. Water testing. We have price reductions. Upgrade the electrical… a new water tank. It’s such a good outlook for first-time buyers, which is great.”
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