Changes to rules for how you can buy property in Canada are likely to give the local market a significant boost in 2025 and beyond.
It’s great news for upgraders and first homebuyers after a two-year period of high interest rates and appreciating property prices.
The price cap for taking out an insured mortgage is rising to $1.5 million, which is up from $1 million.
The change takes the pressure off buyers who might have needed to put down a 20% deposit for a loan of over $1 million.
Another loosening of the rules also sees 30-year amortisation for insured mortgages – a five-year increase for first-time buyers who are purchasing a new home.
In effect, this will bring down the repayment schedule for first homebuyers because they can now stretch their mortgage across 30 years.
They would pay additional interest, but the repayment calculation will be more favourable, allowing them to enter the market with larger mortgages.
Why are these changes necessary?
The truth is, Canada must make homes more affordable – a common challenge in many Western countries with similar property markets.
Not only is there a shortage of homes in Canada – that classic supply and demand scenario that inflates prices – but values have remained high after spiking when mortgage rates dropped to near-zero during the pandemic.
The Canadian Real Estate Association (CREA) predicts for 2025 that we’ll see more homes for sale and lower borrowing costs, which could result in property prices rising an average 4.7%.
The average sale price may hit $722,221, says the CREA.
Is there a chance the changes could drive prices even higher?
Some folks think so. One market outlook by a leading agency predicts a 6% jump in home prices. Detached homes might rise 7% to make the median price $900,000. Condos could rise 3.5% to a median average of $605,993.
The impact of the new rules could be stimulated even further by the pressure on the Bank of Canada to implement a fourth rate cut following the new headline inflation figure of 1.8% – that’s under the bank’s target range of 2-3%.
Some hope the bank will chip another 0.25% off the base rate to make it 3% – a big difference from the 5% that existed in 2023-2024.
The rule changes and prevailing market conditions are setting the Canadian property market up for a big year – and a huge spring selling season.
The only handbrake could be our confidence in the economy and job security concerns, plus the possibility of those US tariffs.
Right now, the positives outweigh the negatives. And that’s great news for first homebuyers, upgraders and investors seeking to expand their portfolios.