Some buyers might step to the sidelines – but many are already well used to tariff chaos, says Toronto broker
Another week, another curveball for the Canadian housing market.
A new escalation in the trade dispute that’s weighed against the market outlook arrived on Friday as US-Canada talks collapsed, sparking a wave of US tariffs and retaliatory measures from the Canadian side.
In some regional markets, homebuyers appeared to be slowly making their way off the sidelines through the summer. But with the economy bracing for the impact of new threats to key sectors, could the trade war dampen that gradual recovery?
Trade uncertainty inevitably shakes some buyer confidence, according to Toronto-based broker Micky Khaneka (pictured top) of Team MKG.
“I think that’s the unfortunate part about it,” he told Canadian Mortgage Professional. “Just when we think people are ready to get settled in and they’re a little bit more comfortable with these big once-in-a-lifetime decisions and they’re coming off the sidelines… something like that just makes them stop dead in their tracks, take a step back and really evaluate: is this something that’s going to have a direct impact to them?”
That might push some buyers back toward the sidelines, but Khaneka doesn’t see a huge immediate cooldown in purchase activity despite the latest threat to the Canadian economy.
Are homebuyers now accustomed to trade chaos?
The prospect of a US trade war on Canada arrived like a bombshell early last year, dominating headlines and fuelling fears of mass job losses from tariff-related shock.
That doomsday scenario has so far failed to materialize, and Khaneka said buyers have slowly come to terms with the reality of trade tensions – with some buyers’ confidence likely to continue improving even in the face of the latest escalation.
“When something just keeps going into the news over and over again, I think it starts to lose its impact,” he said. “I’m seeing that the confidence was just starting to come back. There are a lot more conversations.”
Recent improvements in housing affordability because of the slower market have come as welcome news for many first-time buyers, Khaneka said, and he doesn’t see those purchasers affected much by the trade whirlwind if they don’t work in tariff-impacted professions.
“I’m noticing it personally that in terms of conversations that we’re having with first-time homebuyers, there’s been a lot more buzz about affordability questions, their preapprovals, how much people are qualifying for,” he said. “So I’m definitely seeing an uptick.”
That’s also been boosted by the new GST/HST rebate for first-time buyers, another measure credited with bringing people back into the fray.
This week, Ratehub.ca reported that housing affordability improved across a number of major Canadian housing markets in July, caused mainly by a continuing slide in home prices.
Duration and intensity of trade war a key factor
It remains to be seen how long the current trade war will last, and whether Trump has higher tariffs in mind to add to his existing levies on Canadian goods.
Reports suggest the Canadian government is hunkering down for a dispute that could rumble on well past the US midterms in November, while economists also expect the crisis could keep Bank of Canada interest rate hikes on ice for the coming months.
That means variable mortgage rates are likely to hold steady – good news for buyers – although there are more question marks about fixed rates, particularly after recent upward pressure on Treasury yields in the US.
For now, Khaneka said buyers are likely to still see the upside to getting into Canada’s housing market, although that could change if the trade crisis worsens or drags on.
“Our preapprovals in the last couple of months have really taken an uptick and that shows that it’s not that there’s no interest. It’s just that people are waiting for the right opportunity,” he said. “And I feel like something like this – if there’s a long duration on it, I think we’ll all be impacted one way or the other.
“But on a short-term note, if someone’s not being directly impacted, people can look at this as an opportunity as well.”
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