Is it a Good Time to Buy a House for the First Time?

Are you looking to Buy a House for the First Time?

Let’s face it: The current Canadian real estate market is full of uncertainties.

Are home prices increasing, decreasing, or staying the same? What is the current GTA real estate market telling us? Where will mortgage rates stand by the end of the year? Will the economy improve as 2024 progresses? These are just some of the many variables that home buyers and home sellers need to consider as they navigate the complex housing market.

Research indicates that Canadian households recognize homeownership, whether it’s a single-family house or a condo apartment, as one of the most sound financial decisions. Young households and millennials are often encouraged to pursue homeownership, regardless of the current housing market conditions. And there are alternate home buying options, like home co-ownership to help with it.

In short, now could be an excellent time to buy your first home or a condo. Let’s explore the various factors that make buying a home in today’s market potentially advantageous for you and your family.

Mortgage Rates Set to Decline

Unless Canada’s inflation rate unexpectedly surges, interest rates are expected to decrease soon. The Bank of Canada (BoC) has hinted at this, although they are cautiously monitoring the real estate market.

Economists and market analysts generally agree that the central bank will likely initiate a quarter-point rate cut and possibly reduce rates by a full percentage point by year-end.

What does this mean for prospective homebuyers?

Mortgage rates are expected to drop. Since August 2023, the conventional five-year fixed mortgage rate has exceeded 6%. If inflation is kept in check and the BoC eases monetary policy, the cost of borrowing for a mortgage could fall below 6%. This reduction could save buyers thousands of dollars over the mortgage term, especially if they shop around for favourable terms and conditions. Check out the virtual mortgage calculator to see what your monthly spend looks like in different scenarios.

Government Incentives for First Time Home Buyers

Federal, provincial, and municipal governments have introduced incentives to encourage first-time homebuyers. While some of these programs may not offer substantial savings in high-demand markets like Toronto and Vancouver, they can provide significant savings in regions like Manitoba or Nova Scotia.

Federal Level:

Home Buyers’ Plan (HBP): Canadians can withdraw up to $60,000 from their registered retirement savings plans (RRSPs) to purchase a home.
Tax-Free First Home Savings Account (FHSA): Borrowers can make tax-deductible contributions of up to $8,000 per year, with a lifetime maximum of $40,000.

Additionally, Ottawa has implemented various tax credits and rebates to help address housing affordability challenges.

Provincial Level:

Provinces offer numerous grants and incentives to support first-time homebuyers. For example, Ontario has the Land Transfer Tax Refunds for First-Time Homebuyers, British Columbia offers the First-Time Home Buyers’ Program, and New Brunswick has established the Home Ownership Program.

Municipal Level:

Various initiatives are in place to construct more housing.

These programs collectively help first-time buyers take the plunge into homeownership, potentially allowing them to secure more of the features they desire, such as additional square footage or a preferred location.

Anticipated Economic Soft Landing

Inflation has affected millions of Canadians. While the consumer price index (CPI) remains close to 3%, above the central bank’s 2% target, disinflation has been evident, with slower price increases. The broader economy has also been sluggish, with monthly GDP growth rarely reaching one percent since August 2020.

S&P Global predicts continued slow GDP growth for Canada, with a real GDP rate of 0.9% in 2024. TD Bank forecasts long-term growth decelerating to around 1.8% annually, driven by strong population and labour force growth but lagging productivity.

The upside?

Canada might avoid a recession, suggesting stable employment conditions. This is reassuring for first-time homebuyers, who may be confident that their job situation will remain secure, reducing the risk of depleting savings during job transitions.

While economic conditions can change rapidly, many market experts believe Canada could achieve a soft landing, maintaining growth, a robust labour market, and controlled inflation.

Stabilized Home Price Growth

The Canadian housing market has stabilized. The real estate industry hasn’t experienced the dramatic price fluctuations of a few years ago. The Canadian Real Estate Association (CREA) reported that the MLS® Home Price Index (HPI) decreased by 0.3% in March and increased by just 0.7% year-over-year. While the national average home price was nearly $699,000 in March, the rate of increase has slowed.

In the GTA, the latest peak was reached in February 2022, with an average home price of $1,334K. Subsequently, the lowest dip was in January 2024 with an average home price of $1,025K. Since then, there has been a slow and gradual upward movement in prices.

What does this tell us?

Due to the cyclical nature of real estate, over time the last peak will get surpassed. Making now a great time to buy or invest!

Importance of Housing Supply

Ultimately, supply will shape the Canadian real estate market in the coming years. With Canada’s population growing due to rising immigration, demand will remain strong. The question is whether the country can increase housing supply to meet this demand. There is growing optimism that government construction plans and the industry’s response to the need for millions of new homes over the next decade will strengthen the Canadian real estate market. The future looks bright, and prospective homebuyers can look forward to a hopeful market outlook.

Current average home prices across the GTA

Wondering what the average home prices look like across different communities and neighbourhoods in the GTA? Check out the TRREB community reports for the period Q1 2024, for in depth overview of average home prices.

Home Buyer Resources

Check out some useful information if you are a newcomer, looking to buy your first home, or someone looking to buy another property!

How does Real Estate Buying & Selling work in Canada? 

How to choose a Mississauga Neighbourhood to call home?

Should you Buy New or Resale Property?

What are the Home Buying Expenses?

What is the importance of a Home Inspection?

What are the home closing steps?

What is a Property Appraisal?

Looking to Buy Your Home or Condo in & around the GTA? Contact Team Kalia  today!

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