CEO on opportunities for brokers and borrowers even with a recent housing and mortgage market uptick expected to be short-lived
October saw home resales across Canada post their biggest monthly gain since the end of last year – but is that uptick a flash in the pan, or a sign that the housing market is about to take off at last?
Resales jumped by 7.7% last month, thanks in no small part to 125 basis points worth of interest rate cuts by the Bank of Canada since June. But with a new analysis by Royal Bank of Canada (RBC) indicating the elevated pace of sales “will be hard to sustain” for now, a leading Greater Toronto Area-based mortgage executive is urging brokers not to assume a surging market is on the way in 2025.
George Hugh (pictured top), president and chief executive officer at Taurus Mortgage Capital, told Canadian Mortgage Professional the chances of an imminent market boom appeared distant, not least because the Bank of Canada will be carefully monitoring the housing outlook to see whether its rate-cutting approach is inflaming homebuying activity.
“Interest rates are the one tool the government has that can control house price increases,” Hugh said. “They’re not going to make it run back up, and they’re not going to drop [immediately]. People have to realize that our interest rates went up 4.75 percentage points in a very short time.
“In the past, the government would drop by 4.75% again, but that’s not going to happen. My prediction is that they might come back down to 2.5%. It’s going to be 10 times slower, because they’re going to monitor each drop to see what the impact is on the housing market.”
Why a cooler climate is beneficial for buyers at present
A slow and steady market would be a positive trend over the next 18 to 24 months, Hugh said – and opportunity will remain for brokers and borrowers alike even in a calmer overall climate.
That’s because while the market might not roar into life as it did at the height of the COVID-19 pandemic, purchasing a home remains one of the strongest avenues to wealth creation for Canadians. “It’s a big part of what I do: educate people that the housing market will come back,” Hugh explained.
“I’m not saying it’s going to be booming, but it will come back. And there are opportunities in the market and the buyers that I see entering today are the people who are educated and understand what’s going to happen.”
Drew Donaldson, mortgage broker at Donaldson Capital, highlights that while regulatory changes may improve affordability, interest rates will be the key factor in shaping Canada's housing market in 2025.https://t.co/QAuM9b6Cji#mortgagetrends #economicoutlook
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 15, 2024
Taking a clear-eyed approach to the housing market rather than expecting an immediate upsurge in activity and home values is the right way to go, according to Hugh.
Brokers should be giving clients the advice they need, he said, rather than simply what they may want to hear. “Be patient. Work with good realtors that understand the value of the home. Don’t overpay because you think the value’s going to skyrocket,” he said. “And don’t undersell because you’re desperate.
“Make good, sound decisions. I see some bidding wars happening right now in certain pockets of the GTA and I’m telling people, ‘Do not chase’. You don’t need to… you’ve got choice now.”
Long-term prospects for homeowners strong, but buyers struggle
The market may not be about to take off anytime soon, but prospects for homeowners in the long term remain strong.
Canada Mortgage and Housing Corporation (CMHC), the national housing agency, believes home prices will hit new highs by 2026, even despite the lethargy of the market since 2022.
Sales activity, meanwhile, is projected to tick slightly higher than the 10-year average but remain well below the record levels witnessed during the boom years of 2020 and 2021.
For now, housing affordability is remaining a challenge for many buyers, even with the recent spate of rate reductions. Mortgage payments as a share of income have fallen for the third quarter in a row – but home prices and saving requirements remain well above historical norms, according to a recent National Bank of Canada analysis.
What’s more, while mortgage payments as a percentage of income dropped for the median-priced Canadian home, they remain high at 56.6%, and “the recent brightening may be short-lived,” according to NBC economists Kyle Dahms and Alexandra Ducharme.
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