Dan Petersen

If you are interested in purchasing a residential property in 2023, the competition will be fierce as housing supply remains tight and demand begins to be renewed. Mortgage rates have likely peaked, the consumer remains in decent shape, the Canadian government’s immigration program anticipates seeing hundreds of thousands of newcomers in the next couple of years, and the national economy is holding steady.

While housing affordability is not at the forefront of the federal government as it was in the last election campaign, many local governments are taking action to ensure that more Canadians can achieve the dream of homeownership. But will this be enough to increase housing opportunities and ownership rates? Many industry observers argue that federal policy proposals, such as home renovation tax credits and co-housing CMHC-backed mortgages, might not be enough to curb sky-high prices. Instead, policymakers need to facilitate more supply initiatives, like streamlining new developments and speeding up the application process.

Indeed, despite the housing correction over the last 18 months, prices are still above their pre-pandemic levels, be it a detached residential property in Atlantic Canada or a condominium in downtown Toronto. This has left many Canadian households to continue renting, which has also become an exorbitant expense in plenty of markets.

So, are these trends weighing on homeownership rates across the country?

Home Ownership Rates Drop Across Canadian Real Estate Market

Since the beginning of the century, the homeownership rate in the Canadian real estate market has steadily risen, climbing from 63.9 per cent in 2000 to an all-time high of 68.55 per cent in 2019. However, according to Statistics Canada, the national homeownership rate slipped to a four-year low of 66.5 per cent in 2022. In all provinces, homeownership rates have been on the decline.

Here is a breakdown of provincial homeownership levels:

• British Columbia: -3.2 per cent to 66.8 per cent
• Alberta: -2.7 per cent to 70.9 per cent
• Saskatchewan: -1.9 per cent to 70.7 per cent
• Manitoba: -2.6 per cent to 67.4 per cent
• Ontario: -3.1 per cent to 68.4 per cent
• New Brunswick: -2.7 per cent to 73 per cent
• Nova Scotia: -4 per cent to 66.8 per cent
• Prince Edward Island: -4.6 per cent to 68.8 per cent
• Newfoundland and Labrador: -1.8 per cent to 75.7 per cent

 
Put simply, the homeownership rate is higher at the provincial level than nationally. However, the two most populous and expensive Canadian real estate markets – Ontario and British Columbia – are closer to what it is nationwide.

In addition, Canada ranked 23rd among Organisation for Economic Co-operation and Development (OECD) countries. This was also below the OECD’s average of 71.5 per cent.

Overall, everything that has transpired over the past year, from higher interest rates to slowing economic conditions, has discouraged young Canadians about owning a residential property.

Survey: Young Canadians Discouraged About Homeownership

According to the Bank of Montreal’s recent Real Financial Progress Index, 68 per cent of Canadians feel purchasing a home is out of reach. Seventy-one per cent of Generation Z Canadians (18 to 24) are most likely to share this view. This is followed by 69 per cent of younger millennials (25 to 34) and 65 per cent of older millennials (35 to 44).

The June 2023 survey from the financial institution revealed that 67 per cent of Generation Z Canadians plan to defer their home-buying efforts, while 73 per cent of younger millennials postpone their home-buying plans.

“While the challenging market and economic conditions may pose hurdles and uncertainty, we encourage Canadians to work with a professional advisor or planner to explore the many paths to homeownership,” said Gayle Ramsay, the head of everyday Banking, segment and Customer Growth at BMO, in a statement.

Finally, 71 per cent of Canadians consider housing costs the third largest source of financial anxiety, following unknown expenses and concerns about their personal finances.

Another Stark Revelation: Falling Housing Investment

Housing investment is falling across the country.

Statistics Canada recently reported that investment in building construction slumped 1.3 per cent in March to $20.3 billion. Within this category, residential sector investment construction tumbled 2.1 per cent to $14.6 billion, while non-residential sector spending rose 0.9 per cent to $5.7 billion.

The statistics agency discovered that investment in single-family homes dropped 1.8 per cent to $7.9 billion, with seven provinces recording declines. Moreover, multi-unit construction slipped 2.4 per cent to $6.7 billion, led by Ontario (-4.7 per cent).

This trend is seen in new housing construction activity data Canada Mortgage and Housing Corporation (CMHC) data show that housing starts declined 23 per cent month-over-month in May, totalling 202,494 units. Despite an immense jump in April, it was down considerably in March at 213,800 units.

Rishi Sondhi, an economist at TD Bank, says this has been expected due to declines in home sales feeding “into falling construction activity.”

“This is also consistent with permit issuance, which has dropped to 2019 levels, before the pandemic-induced runup in demand and construction,” Sondhi wrote in a research note.

“That said, starts are volatile and not every data point will move in a straight line downwards. Even with today’s decline, starts are tracking 4% higher than their first-quarter average, thanks to an April pop. This, alongside what will likely be a super-sized gain in home sales should generate a positive second-quarter growth print for residential investment, supporting the overall economy.”

Heading Into 2024 – and Beyond!

The Canadian real estate market has many storylines to follow, from high borrowing costs to tight inventories. The coming year should be an exciting time in Canada, with many components that could weigh on or support the direction of the overall housing activity, be it interest rates or local reforms. Whether prices will rebound in the second half of 2023 and heading into 2024 remains to be seen.

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Closing the deal on a real estate transaction can be an exhilarating yet complex process. As you approach the finish line, it's crucial to ensure that all the necessary steps are taken to facilitate a seamless transition from buyer to owner. In this guide, we'll walk you through the essential elements of preparing for a successful closing, ensuring that every detail is accounted for.

1. Completing Repairs and Inspections: Before closing, it's essential to address any repair issues that were identified during inspections. Work closely with your real estate agent and contractors to ensure that all repairs are completed to the satisfaction of both parties. A well-maintained property builds trust and ensures a smoother closing process.

2. Submitting Disclosures: Transparency is key in real estate transactions. Ensure that you've provided all required disclosures about the property's condition, potential issues, and any historical data. This information helps buyers make informed decisions and can prevent future legal complications.

3. Reviewing Closing Costs: Closing costs can be a significant financial aspect of a real estate transaction. Review the estimated closing costs with your agent and lender well in advance. Understanding these costs will help you prepare financially and avoid any last-minute surprises.

4. Signing Documents: The closing process involves a substantial amount of paperwork. From loan documents to the property deed, ensure that you thoroughly review and understand each document before signing. If needed, consult a real estate attorney to clarify any legal aspects.

5. Handing Over the Keys: The symbolic moment of handing over the keys marks the official transfer of ownership. Coordinate with your agent and the buyer's representative to ensure a smooth exchange. Prepare any necessary instructions, such as alarm codes or appliance manuals, to make the transition as seamless as possible.

6. Closing the Transaction: Closing day is the culmination of weeks or even months of work. Ensure that you have a clear schedule for the day, allowing ample time for the final walkthrough, signing documents, and any last-minute clarifications. Be patient and prepared for potential delays.

In conclusion, preparing for closing involves a series of meticulous steps that demand attention to detail and effective communication. By completing repairs, submitting disclosures, understanding closing costs, carefully reviewing documents, facilitating the key handover, and navigating the final stages, you'll increase the likelihood of a successful and hassle-free closing.

Remember, partnering with a knowledgeable real estate agent and, if necessary, a real estate attorney, can provide invaluable guidance throughout the process. Now that you're armed with these tips, you're well on your way to confidently closing the deal on your real estate transaction.

Your journey to a seamless closing begins with knowledge!

Here are some fun ideas to consider if you are interested in hosting a community event. I’ve also provided some tips on how to ensure the event goes off without a hitch.

Cashback mortgages are a type of mortgage that has gained popularity in Canada over the past few years. With a cashback mortgage, borrowers receive a lump sum cash payment from the lender at closing. This cash payment can be used for various purposes, such as covering closing costs or making home improvements.

How a Cashback Mortgage Works

Cashback mortgages are a type of mortgage that has become increasingly popular in Canada in recent years. With a cashback mortgage, the lender provides borrowers with a lump sum cash payment at closing. This payment can be used for various purposes, such as covering closing costs, making home improvements, or paying off high-interest debt.

The amount of cashback a borrower can receive typically ranges from 1% to 7% of the mortgage amount. However, the exact amount can vary depending on the lender and the borrower’s credit score and financial situation. The cashback payment is typically added to the mortgage balance, which means that borrowers will pay interest on the cashback amount over the life of the mortgage.

Advantages of a Cashback Mortgage

Cashback mortgages can provide several benefits for borrowers in Canada:

A cashback mortgage can help with the upfront costs of buying a home or refinancing an existing mortgage. This can be especially beneficial for first-time homebuyers or borrowers who need more cash.

Cashback mortgages can be a way for borrowers to make home improvements or pay off high-interest debt. By using the cashback payment for these purposes, borrowers can save money in the long run and increase the value of their homes.

A cashback mortgage can provide flexibility and financial security. The lump sum can be used for any purpose, meaning borrowers can choose how to use it based on their financial needs and goals.

Drawbacks of a Cashback Mortgage

While cashback mortgages can provide several benefits, they also have several drawbacks that borrowers should consider:

A cashback mortgage often has a higher interest rate than a traditional one. This means that borrowers will pay more interest over the life of the mortgage, which can result in higher overall costs.

They also often come with restrictions on refinancing or prepayment penalties. These restrictions can make it more difficult or expensive for borrowers to change their mortgage in the future.

In a cashback mortgage, the cashback payment is added to the mortgage balance, which means that borrowers will pay interest on the cashback amount over the life of the mortgage. This can result in higher overall costs and a longer mortgage term.

Finally, cashback mortgages may not be a good fit for borrowers focused on paying off their mortgage quickly. By using the cashback payment for other purposes, borrowers may delay paying off their mortgage and incur more interest charges over the long term.

How to Apply for a Cashback Mortgage

Applying for a cashback mortgage in Canada is similar to applying for a traditional mortgage. Here are the steps involved in applying for a cashback mortgage: 

• Determine whether you meet the eligibility requirements. These requirements can vary depending on the lender but may include credit score, income level, and debt-to-income ratio.
• Gather documentation to support your application. This may include income verification, bank statements, and employment history.
• Shop around for lenders to find the best cashback mortgage option for your needs. This may involve researching different lenders online or working with a mortgage broker.
• Apply for the mortgage. This will involve filling out an application and providing the necessary documentation. If you are approved for a cashback mortgage, you will receive pre-approval, which will outline the terms and conditions of the mortgage.
• Close the mortgage by signing the necessary paperwork and paying any fees or charges associated with the mortgage. Then you can begin moving into your new home!

Cashback mortgages are a popular option in Canada that can provide borrowers with a lump sum cash payment at closing. With careful consideration and informed decision-making, cashback mortgages can be valuable for borrowers looking to purchase or refinance a home in Canada. Talk to your financial advisor to see if a cashback mortgage might be a good option for you.

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