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Suffering From Buyers Remorse? A Look at Canada’s Housing Market

Like most investments, the housing market is unpredictable. This was made clear during the pandemic when house prices first plummeted and then made an unexpected resurgence.

At the height of the home-buying frenzy, when interest rates were at an all-time low, properties were selling for nearly 20% to 30% over the asking price.1,2 Many buyers were purchasing homes without seeing them and waiving all conditions to get the property.

With multiple hikes to interest rates, many Canadians are now worried about their upcoming mortgage renewal. According to a recent poll from Royal LePage, 3.4 million Canadians are set to renew their mortgages by March 2025, and 68% of those who responded say they’re concerned about it.3

Keep reading to learn more about Canada’s housing market and how you can prepare for rising housing costs.

Canada Housing Market

The housing market has taken Canadians on a bit of a rollercoaster ride over the past few years. The market cooled during the first few months of the pandemic but came back strong with record-high home prices and sales volumes.4 Since the Bank of Canada introduced several rounds of interest rate hikes starting in 2022, the housing market quieted down. But, what’s next?

Because of the interest hikes, many prospective homebuyers are patiently waiting to purchase. With an increase in pent-up housing demands and expected interest rate cuts, the Canadian Real Estate Association (CREA) forecasts a slight rise in housing sales activity in 2024.5

When it comes to how Canadians feel about home ownership after the ups and downs of the previous years, the majority still see it as a solid investment. According to RE/MAX 2024 Housing Market Outlook Report, and 73% of Canadians feel confident home ownership is a good investment.6

Similarly, a survey by BNN Bloomberg and RATEDOTCA found that 60% of respondents saw their home as an investment. However, the perspective is shifting. Eleven percent of respondents reported that they felt their home was not a good long-term investment due to recent changes in Canada’s housing market, and 23% said their perception of their home as an investment was weakening.7

Can You Afford Your House?

Even if you think your home is a good investment, if you’re one of the 3.4 million Canadians with an upcoming mortgage renewal, you might question your ability to afford your house. If you took out a mortgage with a 2% interest rate and your renewal comes in at 5%, can you still afford to pay your bills?

Matt Fader, a Licensed Insolvency Trustee (LIT) from Allan Marshall & Associates says “whether or not you can afford your home is not just a question of whether you can afford your mortgage payments”. There are many other costs to consider. He cautions that buyers, especially first-time home buyers, need to be aware of the additional costs of home ownership, including:

  • Utility bills
  • Property taxes
  • Repairs and maintenance

If you decide to purchase a home, Fader recommends putting money into a bank account or tax-free savings account to cover additional expenses. He says if homeowners can’t afford to do this, they may have to fall back on credit or be forced to borrow to make it all work.

A mortgage is the MINIMUM you’ll pay. Rent is the MAXIMUM you’ll pay.

~Ramit Sethi (Author, Financial Influencer)

Is Owning a Home a Good Investment?

While owning a house has historically been seen as a good financial investment, it’s not guaranteed. Like any financial decision, there are pros and cons to owning a home, and many of them have nothing to do with finances.

For some, owning a home is a dream that provides a sense of stability and security. It provides the opportunity to personalize your space and build a community. It’s a sign of success and accomplishment.

But, is it a good financial investment?

“The concept of buying a house as an investment and using it as a retirement fund is gone”, says Fader.

While it’s possible for your home to appreciate over time, Fader cautions that property appreciation is not what it used to be. Gone are the days when you could buy a house for $20,000 and sell it for $300,000 40 years later. Today, if you buy a house for $400,000, you’re likely not going to sell it for $5 million 40 years later.

On the other hand, houses are expensive. There’s constant maintenance and repairs which can cost a lot of money. Fader says, if you think of your house as an investment but you can’t afford to maintain it, it will start to fall into disrepair. Then, it will start to devalue.

What Can You Do To Prepare For Rising Costs?

If your mortgage renewal time is just around the corner and you’re feeling worried, what can you do to prepare?

According to Fader, if you know you’re going to take a financial hit, “start bracing for the hit now rather than trying to react later.” First, he says, “Identify the problem so you can get creative in fixing it now rather than reacting later. You have a lot more options before it becomes a full-blown problem.”

Consider if you can take advantage of a restructuring opportunity or reach out to a professional for advice. If you know you can’t afford to keep your house, consider selling it. Fader recognizes this is not what most people want to do but, he says, “You still might be able to walk out with a bit of money.”

Lastly, stop trying to keep up with the Joneses. It’s easy to look around and see people living in giant houses, with two cars, and wonder why everyone can afford a lifestyle that you can’t. Fader says, the reality is, I often see these people in my office and realize, “Oh, I know how you do it, because you’re in debt up to your eyeballs.”

Speak to a Licensed Insolvency Trustee

If you’re worried about the state of Canada’s housing market and your upcoming mortgage renewal, speak to a Licensed Insolvency Trustee. The earlier you reach out for help, the more options you’ll have available. Even if you don’t know what you need, having a conversation with a qualified professional can give you more information to work with. For a free, no-obligation consultation, contact Allan Marshall & Associates at 1-888-371-8900 or contact us online.

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Matthew Fader

“I joined Allan Marshall and Associates in 2017 as an Estate Manager and have worked in the insolvency field since 2005. I feel with my counselling experience and positive outlook, I help to reassure our clients that we are there to help with any debt questions or financial insecurities they may have. Our main company goal is to ensure the best possible experience for those needing our services and treat every client with dignity and respect throughout the process.”