Housing Predictions for Canada in 2020
Is 2020 the year to buy or sell a home? The good news is that after a rocky 2019, we’re seeing some changes in the market that lead us to think that 2020 should be a good year for the real estate market; whether you’re trying to buy a new home or sell your current home. Some additional support from the government is making it easier for home buyers - especially first-time buyers - to get into a home, but people are still looking for affordable options.
Learn more about our predictions for the Canadian real estate market in 2020.
Adjusting to the Stress Tests
As you probably know, new laws went into effect at the beginning of 2019 that made it harder to buy a home. Suddenly, those who were getting ready to purchase their homes found that they no longer qualified or had to come up with a bigger down payment.
The new stress test was designed to make sure people could actually afford the homes they were buying. When this went into effect, the housing market slowed dramatically.
Fortunately, it’s been a year since those rules went into place, and both home buyers (and home builders!) have adjusted to these new rules. Buyers are incorporating the restrictions into their plans and purchasing once they’ve saved enough to meet the requirement. This means we’re starting to see more movement in the housing market.
The First-Time Homebuyer Incentive
In September 2019, the federal government launched the First-Time Homebuyer Incentive to help those with incomes of $120,000 or less with the purchase of their first home.
Through this program, you can get a shared equity mortgage for between 5 and 10 percent of the cost of the home. Essentially, you can think of this as a loan from the government, but you don’t have to make monthly payments on it. You do have to pay the money back, but you need to do it within 25 years or when you sell the home.
The “shared equity” is a little bit confusing for some people, but basically, it means if your home has increased in value, you have to pay back more than you borrowed. However, if your home decreases in value, you pay less. To break it down to simple terms, if you get 10 percent through this program, when you pay it back, you pay 10 percent of the value of your home at the time you pay it back, regardless of whether the home has increased or decreased in value.
This program makes mortgages more affordable, so it’s easier for more people to buy a home. It should result in increased activity in the housing market.
Increased Limits on RRSP Borrowing
The Home Buyers Plan has always allowed buyers to borrow money from their RRSP for a down payment on a first home. In the middle of 2019, though, the individual limit for this was increased to $35,000 (up from $25,000). For a couple, this means the possibility of borrowing up to $70,000 for the down payment on a home.
What makes this different from the First-Time Homebuyers Incentive is that you do need to make regular payments on the loan, and the payment on that loan will be factored into the banks' decision when it comes to affordability of the mortgage. On the bright side, there are no income limits for this program, so you can borrow what you need.
Investment Properties Becoming Hotter
The rental market has seen an upswing for a variety of reasons: retirees see renting as an affordable option; millennials tend to prefer renting in urban centres over buying in suburban areas, and people are waiting longer to buy homes due to the mortgage stress test.
With the demand in the rental market, we’re seeing more and more people interested in buying income properties.
In fact, some people are including an income property, like a basement suite, as part of their private home purchase! This contributes to the monthly mortgage payment, making it more affordable to purchase a home. If you’re interested in taking advantage of this option, talk to a Sales Agent to learn more.
Balanced Buyers and Sellers Markets
All in all, we can’t really say that 2020 is going to be a better market for buyers or sellers. The population of Winnipeg is increasing, and newcomers are going to be looking for affordable housing options, making it a good time to sell your current property for a fair price. At the same time, there aren’t as many people looking to “move up”, which means you can get a great deal on the brand-new home of your dreams.
We’re not fortune-tellers, but we think that current trends in the real estate market point toward 2020 being a great time for both buyers and sellers. It’s time to start thinking about upgrading to a home that meets all of your needs.
