Real Estate News

How Might Tariffs Affect the Real Estate Market?

Feb 8, 2025

In today’s interconnected world, the impact of tariffs—taxes placed on imported and exported goods—extends beyond trade negotiations and international businesses. These policies can also influence the real estate market, affecting everything from construction costs to housing prices. Understanding how tariffs could play a role in the housing market helps buyers, sellers, and industry professionals prepare for potential shifts.

What Are Tariffs?

A tariff is essentially a tax on goods coming into a country. Governments impose tariffs to protect domestic industries, encourage local production, or address trade imbalances. While that may sound like an issue reserved for big corporations and international trade deals, tariffs can have very real, on-the-ground effects on the housing market—especially when they impact the cost of materials and investment trends.

Rising Construction Costs

One of the most direct ways tariffs affect real estate is by increasing the cost of building materials. Items like lumber, steel, and concrete are frequently imported, and when tariffs are imposed, their prices rise. This leads to higher costs for builders, who often pass those costs on to buyers in the form of more expensive homes.

In a market already grappling with affordability challenges, higher construction costs could mean fewer new homes being built—particularly in the entry-level market, where profit margins are already tight. This supply crunch could drive up prices, making it even harder for first-time buyers to enter the market.

Effects on Home Prices

With rising construction costs, new home prices typically increase. In turn, buyers may shift their focus to resale properties, driving up demand for existing homes. This could be good news for sellers but could also make affordability an even bigger issue.

On the flip side, if tariffs contribute to broader economic uncertainty or higher costs of living, buyers may hesitate to make big financial decisions like purchasing a home. This could slow down price growth—or in some cases, lead to price corrections in certain markets.

Foreign Investment and Market Shifts

Tariffs don’t just impact local buyers and sellers—they can also influence international investment. When trade tensions rise and tariffs are in play, some foreign investors may be less inclined to put their money into Canadian or U.S. real estate. Cities that typically attract international buyers, such as Toronto or Vancouver, could see a slowdown in foreign demand if tariffs disrupt economic confidence.

At the same time, if tariffs cause financial instability in certain regions, some investors may actually turn to real estate as a safe-haven investment, leading to an increase in activity in specific markets.

Delays and Supply Chain Disruptions

Building a home isn’t just about lumber and steel—it’s also about getting those materials on-site in a timely manner. Tariffs can disrupt global supply chains, causing shortages or delays in key materials. This can slow down construction timelines, leading to fewer homes hitting the market when they’re needed most.

For developers, this uncertainty might make them hesitant to take on large projects, further reducing housing supply and putting additional pressure on prices.

Impact on Consumer Confidence

When tariffs increase the price of everyday goods—from appliances to furniture—consumers start to feel the pinch. If household expenses rise due to higher costs on imported goods, potential buyers may tighten their budgets and put off purchasing a home. This hesitation can create a slowdown in the housing market, especially in regions where affordability is already stretched.

On the other hand, if tariffs lead to more domestic job growth in certain sectors, some areas could see an increase in housing demand as local economies strengthen. It all depends on how trade policies play out over time.

What’s the Long-Term Outlook?

Tariffs and trade policies are always evolving, so predicting their long-term effects on real estate is challenging. If tariffs remain in place for an extended period, we could see lasting shifts in the market—fewer new homes, rising prices for existing ones, and changes in investment patterns.

However, if trade tensions ease and tariffs are lifted, we could see a reversal of some of these trends. Construction costs may stabilize, supply chains could recover, and foreign investment could flow more freely again.

Staying Informed Is Key

While tariffs might seem like an issue for politicians and economists to worry about, they have a ripple effect that can directly impact homebuyers, sellers, and real estate professionals. Keeping an eye on trade policies and market reactions can help you make informed decisions, whether you’re buying, selling, or investing.

As the real estate market continues to adapt to economic changes, staying ahead of these shifts will be essential. Whether it’s through strategic timing, diversifying investment approaches, or simply understanding how tariffs affect housing prices, knowledge is power in an ever-changing market.

Ontario Home Renovation Savings Program

January 7, 2025

Ontario is introducing new energy efficiency programs to help residents and businesses reduce energy consumption and costs. A key initiative is the Home Renovation Savings Program, launching on January 28, 2025, which offers rebates covering up to 30% of expenses for energy-efficient home improvements.

Home Renovation Savings Program

This program provides financial incentives for various home upgrades, including:

  • Windows and Doors: Installing energy-efficient models to minimize heat loss.
  • Insulation and Air Sealing: Enhancing insulation and sealing to improve energy retention.
  • Smart Thermostats: Implementing devices that optimize heating and cooling efficiency.
  • Heat Pumps: Adopting efficient systems for heating and cooling.
  • Rooftop Solar Panels and Battery Storage: Generating and storing renewable energy on-site.

Later in 2025, the program will expand to include rebates for energy-efficient appliances like refrigerators and freezers.


Eligibility Expansion

With the enactment of the Affordable Energy Act on December 4, 2024, eligibility for these programs has broadened to include homeowners who heat their homes with propane or oil, removing previous restrictions that limited access to those using electric heating.


Additional Support for Small Businesses

The province is also enhancing the Peak Perks program to support small businesses, such as convenience stores and restaurants. Participants can receive a $75 incentive upon enrolment and an additional $20 annually for each eligible smart thermostat connected to their HVAC systems.


Projected Impact

By 2036, these initiatives aim to reduce Ontario's peak electricity demand by 3,000 MW—the equivalent of removing three million homes from the grid. This reduction is expected to save ratepayers approximately $12.2 billion in electricity system costs by avoiding the need for new generation infrastructure.


For more information on these programs and how to participate, visit: Ontario.ca

Stress Test Removed from Uninsured Mortgage Renewals

December 5, 2024

If you’re nearing the end of your mortgage term and dreading the stress test, there’s good news! Recent changes mean that for some homeowners, renewing your mortgage just got easier. Here’s what you need to know:

What Is the Stress Test?

The mortgage stress test is a financial assessment introduced in Canada to ensure borrowers can handle their mortgage payments, even if interest rates rise or their financial circumstances change.

When applying for a mortgage, lenders calculate your ability to afford payments based on either:

  • The contract rate (the actual interest rate of your mortgage) plus 2%, or
  • The benchmark rate set by the Bank of Canada, whichever is higher.

This ensures borrowers aren’t overextending themselves and adds a safety buffer in case of future financial challenges.


What Has Changed?

The federal government has removed the requirement for lenders to apply the stress test when renewing uninsured mortgages with the same lender. Previously, borrowers had to prove they could handle payments at an interest rate significantly higher than their actual contract rate.

Now, as long as you stay with your current lender, you don’t need to pass the stress test to renew your uninsured mortgage.


Who Does This Apply To?

This change applies to:

Homeowners with uninsured mortgages (typically those who had a down payment of 20% or more when purchasing their home).
Borrowers renewing their mortgage with the same lender.

It’s important to note that this policy doesn’t apply if you switch lenders at renewal. In those cases, the stress test will still apply.


What Does This Mean for You?

Simplified Renewal Process: Staying with your current lender means you won’t need to meet additional financial benchmarks.
More Flexibility: For borrowers with fluctuating incomes or whose financial situations have changed, this could prevent the stress and uncertainty of a renewal application.
Negotiate Rates: Even though you’re not switching lenders, it’s still worth negotiating for a better interest rate or improved terms.


Potential Drawbacks

While this change simplifies renewals, it might reduce your leverage to shop around for the best rate. If you want to switch lenders to secure a better deal, the stress test will still apply.


What Should You Do?

Review Your Options: Always start the renewal process early to explore whether sticking with your lender or shopping around is the better choice.
Consult an Expert: Mortgage brokers can help you weigh the benefits of switching lenders versus staying put.
Plan Ahead: If you think you might want to switch lenders at renewal, focus on maintaining a strong financial profile to pass the stress test.

This policy change is aimed at easing the burden on Canadian homeowners and ensuring they can stay in their homes without unnecessary financial hurdles.

If you have questions about how this impacts your homeownership journey, feel free to reach out. I’m always here to help with advice tailored to your unique situation!

New Mortgage Rules & How it Will Affect the Market

November 10, 2024


Starting December 15, 2024, new mortgage reforms will impact home buyers across Canada, making homeownership more attainable for many—especially in high-cost regions like Toronto and Vancouver. Here’s what these changes mean for buyers, sellers, and the overall real estate market.

30-Year Amortization for First-Time Buyers

Under the new regulations, all first-time home buyers, as well as those purchasing new construction homes, can now access a 30-year amortization period. By spreading the mortgage repayment over a longer time, buyers benefit from reduced monthly payments. For example, a 30-year mortgage on a $500,000 loan with a 5% interest rate results in a monthly payment of $2,684 compared to $2,908 with a 25-year amortization. This lower payment option not only eases monthly expenses but also increases mortgage affordability, allowing more Canadians to qualify under the current stress test requirements.


Higher Insured Mortgage Cap: Up to $1.5 Million

The insured mortgage cap will increase from $1 million to $1.5 million. This adjustment is particularly beneficial for buyers in expensive housing markets where properties are often priced above the former $1 million limit. Now, buyers in regions with higher home prices can qualify for insured mortgages on homes up to $1.5 million with a down payment of less than 20%. This change broadens buying power and allows access to a wider range of properties.


Potential Impacts on the Real Estate Market

These reforms are expected to boost demand in the real estate market, with more buyers able to afford homes they previously couldn’t reach. For sellers, the changes may stimulate more competitive offers, as expanded financing options increase buyer participation, potentially driving up home values in desirable areas.

However, there’s also the possibility of increased property prices as demand rises, especially if housing supply does not keep pace with this new buyer influx. This supply-demand dynamic could lead to further price hikes in high-demand urban markets, affecting affordability for some.


Added Flexibility for Buyers and Investors

For investors, the new rules extend 30-year amortizations to new builds, making it easier to finance construction properties. This flexibility could drive more investment in new developments, a potential boost to housing supply in the long term—a positive response to Canada’s housing shortage.


The Big Picture: Opening Doors to More Canadians

These reforms are part of Canada’s broader housing initiative aimed at increasing access to homeownership while tackling affordability issues. With plans to support the creation of 4 million new homes, the government aims to address Canada’s housing crisis and unlock pathways to homeownership for future generations.


For buyers and sellers alike, these mortgage reforms introduce new opportunities and strategic considerations. As always, it’s essential to consult with a real estate professional to understand how these changes might specifically impact your buying or selling plans.

Feel free to reach out if you’d like to discuss how these changes could affect your real estate journey in 2024 and beyond.

The Cost of Waiting For Interest Rate Drops

October 6, 2024


When the Bank of Canada announces a rate cut, it tends to make headlines across the country, sparking curiosity and excitement. But what do these cuts really mean for homeowners, homebuyers, and anyone looking to get a mortgage? Let’s break it down so you can better understand how these decisions could impact your financial plans.


What is the Bank of Canada Rate?

The Bank of Canada (BoC) sets what’s called the “overnight rate.” This is the interest rate at which banks lend money to each other overnight. Although this doesn’t directly dictate the interest rates we, as consumers, get on mortgages, it heavily influences them.


How Does a Rate Cut Work?

When the BoC cuts the overnight rate, it becomes cheaper for banks to borrow money. In turn, banks may pass these savings along to consumers by lowering the rates on their financial products—most notably, variable-rate mortgages and lines of credit. Lower interest rates mean you pay less in interest on your mortgage, making homeownership more affordable, at least in theory.


How Rate Cuts Affect Variable-Rate Mortgages (or Adjustable-Rate Mortgages)

If you already have a 'variable-rate mortgage', a rate cut could mean immediate savings. Your interest rate may decrease, which lowers your monthly payments or allows you to pay off your mortgage faster. This is because variable-rate mortgages fluctuate with the prime rate, which banks adjust in response to changes in the BoC’s overnight rate. Just how much can you expect to save? A 0.25% rate drop is equal to about $13 per $100,000 in mortgage that you have. That’s it unfortunately. A mere $13 monthly savings.

For prospective buyers considering a variable-rate mortgage, a lower interest rate might make this option more appealing. However, keep in mind that variable rates are subject to change, and if rates go up in the future, your payments could increase.


What About Fixed-Rate Mortgages?

Fixed-rate mortgages are a bit different. These rates are influenced by the bond market rather than the BoC’s overnight rate. However, a rate cut can still have an indirect effect on fixed-rate mortgages. When the overnight rate is cut, the bond market can respond by lowering yields, which may lead to lower fixed mortgage rates in the long term. This isn’t always immediate, and fixed rates tend to move less dramatically than variable rates.

If you’re locking in a fixed-rate mortgage, a BoC rate cut may not give you instant savings, but you might see rates trend down in the weeks or months following the announcement.


Waiting for Rate Cuts to Save Money on Housing

Perceived lower borrowing costs tends to encourage more people to buy homes, which increases demand and can push prices higher, especially in competitive markets like Kitchener-Waterloo. This is great for Sellers, but not so much for Buyers.

Home prices continue to go up without the strain of increased buyer demand. The amount you can pay for a house today, can alter by thousands to tens of thousands of dollars each and every month. A heated market caused by increased buyer demand can drive home prices to increase weekly. Unless you are able to increase your downpayment, increased house costs means a larger mortgage and less affordability.


Should You Wait to Buy?

Regardless if you are planning on getting a variable-rate or fixed-rate mortgage, the cost of waiting for interest rate drops could potentially mean paying a lot more for a home. If all want-to-be homeowners have the same thought, then you even risk being bumped out of being able to afford the style of home you want, due to mass multiple bid scenarios driving prices higher.

Bottom line, make sure you are partnered up with professional and trustworthy mortgage and real estate agents, to get the full picture on how much you buying a home today versus tomorrow might cost you.

Canada Greener Homes Initiative

September 1, 2024

The Canada Greener Homes Loan is an excellent initiative designed to support homeowners in making energy-efficient upgrades to their properties. By offering up to $40,000 in interest-free loans, this program helps Canadians invest in home improvements that not only enhance comfort and livability but also contribute to long-term savings on energy bills. Upgrades like better insulation, high-efficiency windows, and modern heating systems can transform a home, making it more enjoyable to live in and extending its lifespan.

Additionally, these improvements can significantly boost a home's market value, making it a more attractive option for potential buyers. Energy-efficient features are increasingly sought after, and homes with such upgrades often command higher resale prices. With the Canada Greener Homes Loan, homeowners can undertake essential renovations now and benefit from a more valuable and efficient property when they decide to sell.

Learn more about the loan: Canada Greener Homes Loan

Check out eligible retrofits: Eligible retrofits and grant amounts

Mortgage Renewal Options - With Tim Bloomfield

August 8, 2024

When it comes time to renew your mortgage, you're faced with a crucial decision that can significantly impact your financial future. Whether you're looking to secure a better rate, access your home's equity, or simplify your payments, understanding your options is key. Here’s a breakdown of the three main choices you have when renewing your mortgage: signing with your current lender, transferring to a new lender, or refinancing with either your current or a new lender.


The Three Options for Mortgage Renewals

Sign with Your Current Lender

Sticking with your current lender can be the simplest and most straightforward option. Every lender has its own process and timeline, so it’s essential to pay attention to the renewal paperwork they send out, typically around four months before your renewal date. The biggest advantage of renewing with your current lender is that you avoid the need to requalify for your mortgage. This means less paperwork, fewer headaches, and a quicker renewal process.

Transfer to a New Lender

If you’re looking to save money, transferring your mortgage to a new lender could be the way to go. This option often allows you to combine your mortgage with a secured line of credit into one easy payment. Plus, new lenders tend to offer the best and lowest rates, and they typically cover the costs of legal fees and appraisals, making this an attractive option. However, it’s important to note that transferring to a new lender may not be the best choice if you have a high level of debt, as you’ll need to requalify for the mortgage. If your original mortgage was insured, you can requalify using the contract rate for the stress test, which might ease some concerns.

Refinance with Your Current or a New Lender

Refinancing is a smart move if you’re looking to consolidate debt or access your home’s equity. While refinancing typically comes with higher interest rates compared to renewals or transfers, it offers the flexibility you might need to achieve your financial goals. Like with transferring, you’ll need to requalify for the mortgage, but the benefits of consolidating your debt or unlocking your home’s equity might outweigh the higher rates.

Choosing the right option for your mortgage renewal is a decision that should be made carefully, considering your financial situation and long-term goals. Whether you choose to stay with your current lender, transfer to a new one, or refinance, understanding the pros and cons of each option will help you make the best choice for your future.

If you have questions about what your best option might be, connect with Tim Bloomfield for expert advice:
tim.bloomfield@valkofinacial.ca 
(519) 497-0512

Capital Gains Tax increase graphic

The Impact of Recent Capital Gains Tax Increase in Canada on Cottage and Second Home Owners

June 30, 2024

The Canadian government has recently implemented an increase in the capital gains tax, a move that has sparked significant concern among property owners, particularly those with cottages, investment properties, or second homes. While this tax change is aimed at generating additional revenue, it also has substantial implications for regular Canadians who may not see themselves as traditional investors.

UNDERSTANDING CAPITAL GAINS TAX

Capital gains tax is a levy on the profit realized from the sale of a non-primary residence, such as a cottage, second home, or investment property. The gain is calculated as the difference between the purchase price and the sale price of the property, with adjustments for certain expenses.


THE RECENT TAX INCREASE

The recent change involves increasing the inclusion rate for capital gains tax. Previously, a straight 50% of the capital gain was taxable. As of June 25, 2024, however, you will be taxed on 50% of your annual capital gains up to $250,000. For any capital gains over $250,000, that ratio increases to two-thirds, or approximately 66.67%. This means that more of the profit from the sale of these properties will be taxed, resulting in a higher tax burden for property owners.


IMPACT ON REGULAR CANADIANS

Cottage Owners

Generational Impact: Many Canadians own cottages that have been in their families for generations. The increased tax burden can make it more challenging to keep these properties within the family. Selling the cottage to cover the tax bill might become a necessity, disrupting family traditions and heritage.
Increased Costs: For those looking to sell their cottage, the increased tax means a significant portion of the proceeds will go to taxes, reducing the funds available for other uses, such as retirement savings or funding children’s education.


Second Home Owners

Retirement Planning: Many Canadians purchase second homes as part of their retirement plan, expecting to sell them for a profit. The higher capital gains tax can eat into these profits, affecting the financial security of retirees.
Affordability: The increased tax might deter potential buyers, leading to a slower market for second homes. This could result in lower sale prices, further reducing the expected return on investment. A good example of that is what is currently occurring in the condo apartment market.


Investment Property Owners

Reduced Profit Margins: Regular Canadians who have invested in rental properties for additional income will see a reduction in their profit margins due to the increased tax. This might lead some to reconsider the viability of maintaining these investments.
Market Dynamics: With the increased tax burden, there might be fewer properties on the market as owners hold onto their investments longer to avoid the tax hit. This could reduce the supply of rental properties, potentially driving up rents and affecting the rental market.



SHOULD YOU SELL?

The decision to sell in light of the increased capital gains tax depends on individual circumstances. Here are a few considerations:

Financial Goals: Assess your financial goals and the role your property plays in achieving them. If the property is essential for your retirement plan or income, holding onto it might still make sense.
Tax Planning: Consult with a tax advisor to explore strategies for minimizing the tax impact. This could include timing the sale to coincide with lower income years or exploring exemptions and deductions that might apply.
Market Conditions: Consider the current real estate market conditions. If property values are high, selling now might still yield a significant profit even after taxes. Conversely, if the market is slow, it might be worth holding onto the property until conditions improve.



CONCLUSION

The recent increase in capital gains tax in Canada presents a new challenge for regular Canadians who own cottages, second homes, or investment properties. While the tax hike is aimed at generating revenue, it has the potential to impact family traditions, retirement plans, and the overall financial well-being of many. Careful consideration of personal financial goals, market conditions, and strategic tax planning can help mitigate some of the effects of this increased tax burden. Consulting with financial and tax advisors is crucial to making informed decisions about whether to sell or hold onto these properties in the current economic climate.
 

Bank of Canada Cuts Key Interest Rate to 4.25%

June 9, 2024

The BOC cut the key interest rate for the first time since the pandemic, and is even suggesting there may be more cuts coming. What does this mean for you? Depending if you are on the buying side or selling side of a house sale, this is how you may be impacted: 


FOR BUYERS

Lower Mortgage Rates

Affordability: With the cut in the key interest rate, mortgage rates offered by banks and other lending institutions are likely to decrease. This means lower monthly payments for homebuyers, making real estate more affordable.
Qualification: Lower rates improve buyers' debt-to-income ratios, potentially allowing more individuals to qualify for mortgages and enabling buyers to afford more expensive homes than they could previously.

Increased Purchasing Power

Bigger Budgets: Buyers can leverage the lower rates to stretch their budgets further. This might allow them to consider properties that were previously out of reach.
Investment Opportunities: Lower borrowing costs can make real estate investments more attractive, encouraging more people to buy properties for rental income or capital appreciation.

Market Competition

More Buyers: The lower rates are likely to attract more buyers into the market, increasing competition for homes. This can be particularly intense in markets where housing supply is already tight.


FOR SELLERS

Higher Demand

Increased Buyer Interest: As more buyers enter the market due to more affordable mortgage rates, sellers may see heightened interest in their properties, potentially leading to quicker sales.
Competitive Offers: Higher demand can result in multiple offers on properties, often leading to bidding wars, which can drive up the final sale price.

Potential for Price Appreciation

Rising Home Prices: The increase in demand typically puts upward pressure on home prices. Sellers might be able to command higher prices for their properties, benefiting from the competitive market environment.

Faster Transactions

Quicker Sales: With more buyers eager to capitalize on lower rates, homes may spend less time on the market. This can be advantageous for sellers looking for swift transactions.


GENERAL IMPACT ON THE REAL ESTATE MARKET

Economic Stimulus

The rate cut is intended to stimulate economic activity, and the real estate sector is a significant part of the economy. Increased activity in real estate can have a positive ripple effect, boosting related industries such as construction, home improvement, and real estate services.

Inventory Challenges

Supply Constraints: If the supply of homes doesn’t keep up with the increased demand, it can lead to inventory shortages. This might make it harder for buyers to find suitable homes and could contribute to further price increases.

Inflation Considerations

While the rate cut aims to boost the market, it may also lead to higher inflation. This could impact the real estate market by increasing the costs of building materials and labor, potentially affecting new construction and renovation projects.


SUMMARY

The Bank of Canada’s interest rate cut to 4.25% is poised to significantly influence the real estate market. Buyers will benefit from lower mortgage rates and increased affordability, which could allow them to purchase more expensive homes or enter the market for the first time. Sellers, in turn, are likely to see increased demand, potentially higher sale prices, and quicker transactions. However, these changes may also bring challenges such as increased market competition and potential inventory shortages, along with broader economic impacts like inflation.
 

Bank of Canada