Mortgage and real estate experts believe that the current situation in the housing market in Canada is favorable for newcomers and investors due to relatively low interest rates. The Bank of Canada has kept the key rate at 2.25% for the second consecutive time, creating a window of opportunity for those who have been postponing the purchase of housing or entering the real estate investment market.
Why Now is a “Window of Opportunity” for Buyers
According to Ann-Elise Kugliari Allegretti, Vice President of Research and Communications at Royal LePage, first-time homebuyers today can enter the market on more favorable terms than 5–10 years ago. The low rate reduces the cost of mortgage servicing and increases housing affordability for households with average incomes.
At the same time, Morguard expert Keith Redding believes that “it may not get better than it is now,” and urges those who are “sitting on the fence” to make a decision while conditions remain favorable. Both experts agree that an important factor is not only the rate but also buyers’ confidence in the future.
Age and Type of Housing: A New Portrait of the Buyer
The average age of a first-time buyer in Canada is in their mid-30s, which changes the demand for the type of housing. Such buyers are more likely to need not a “starter” studio but a more spacious home that meets family needs. Kugliari Allegretti speaks of a “crossroad” where a late entry into the market coincides with higher expectations for the size and functionality of the home.
Fixed or Variable Mortgage
The choice between a fixed and variable rate, emphasizes Kugliari Allegretti, is a matter of personal risk tolerance.
- A fixed rate provides predictability of payments for the entire term.
- A variable rate can be beneficial if rates remain low or decrease, but adds uncertainty.
The expert stresses that it is important to consider how long the household is willing to bear the risk and how comfortable they feel with potential payment fluctuations.
Investing in REITs: A Moment for Re-Entry
A stable key rate creates opportunities for investors, particularly in real estate funds — REITs (Real Estate Investment Trusts). Cheaper financing simplifies transactions with real estate and can improve the return prospects of such funds.
Against the backdrop of a decrease in the share of vacant offices and the gradual return of employees to offices, Redding notes that now may be a good time to buy REITs with a predominantly office portfolio and hold the asset in anticipation of a “moderate recovery” in the market. He also reminds that it is always beneficial to review the structure of one’s investment portfolio and add diversification.
