The latest rate announcement from the BoC was made this morning and they have decided to hold steady at 5%. This is welcomed news for most Canadians, especially those with mortgage renewals and new purchases on the horizon, but the governor of the Bank, Tiff Macklem, indicated that now is not the time for discussions about rate cuts. He also noted that inflation numbers are still elevated and there is risk that the conflict in Gaza will expand to include more regional actors, potentially reducing supply of oil to international markets, which would elevate the price of a barrel of oil and thus the cost of everything else in response. Interest rate hikes remain the Bank’s primary instrument for combatting such inflationary circumstances.  

The next and final announcement for 2023 will be on December 6.

Timing your market action, either to buy or sell, is certainly impacted by the direction of these announcements. For customized, personal advice, reach out to me any time to discuss your real estate decision making.

Details have just been announced about two parts of the NL government’s five part plan to improve affordable housing in the province. These two policies are directed toward assisting first time homebuyers (FTHB) with their down payment and closing costs. Summarized, FTHB will be able to apply for:

1. a repayable loan up to five percent of the purchase price of a new or existing home, to a maximum purchase price of $350,000 in St. John’s.

2. a grant of 50% of the legal closing costs up to a maximum of $1,500.

Important facts to know:

• Eligibility will be based on incomes under $95,000, with between $85,000 and $95,000 seeing loan amounts reduced on a sliding scale.

• There will be 150 applicants successfully supported by these policies. 

• Down payment assistance loans will not have to be repaid for 5 years from time of purchase. 

• Closing cost grants match the Federal program, which means FTHB could see up to $3000 contributed by government toward closing costs.

• Program application will open November 1, 2023

Without question, this is an incentive that anyone thinking about a first home will need to explore, as a down payment assistance program like this will allow people the ability to enter the housing market without having the 5% savings already made. For those buyers who already have their down payment saved for, allowing them to keep their savings and schedule for gradual repayment of the loan in time will positively impact their financial stability. And finally, with $3000 available between federal and provincial funding for closing costs, a fully funded grant could offset roughly 60% of the expected closing costs, leaving buyers with more money in their pockets. 

If you are a first time buyer looking for more information about this newly minted program, send me a message today - I can help answer any questions you might have and take the mystery out of the process of buying your first home!

In line with the rumours I was hearing, the NL government did carry through with a policy announcement Monday, aimed at improving availability of affordable housing. The announcement was well received in industry circles, but predictably criticized as too little, too late by opposition leaders. While the initiatives do address major policy targets of affordability, supply, and homelessness, questions remain regarding implementation timelines, adequacy of funding, and unintended consequences. Below are the five points of the plan and my initial thoughts, which I'll expand upon more in subsequent posts. For now, suffice to say affordable housing is a hot topic and a major policy issue for all levels of government.

The five points of the plan are as follows:

1. Remove GST/HST on purpose built rental properties. This is an initiative that was announced by the federal government already, but I assume this means the PST component will be removed as well. Good if there is an interest from developers and investors to build such housing options, which comes down to how profitable it actually is versus other investment options.

2. A low interest financing program that will provide financing to assist in constructing purpose-built rental housing. Great initiative, but again, a function of how profitable the overall investment opportunity is, and whether there are developers waiting to pounce that this policy creates a tipping point for proceeding.

3. Use of available Provincial Government-owned land and buildings for construction or conversion for purpose-built rental housing. Looks good to me, as long as the government follows through with the funding to finance these opportunities, which they appear committed to doing with the cooperation of the private sector as noted above.

4. A home ownership assistance program for first-time homebuyers with lower-to-moderate incomes who qualify for a mortgage to access the required downpayment to purchase a home. The program will also assist with closing costs of up to $1,500 to match the Federal First-Time Home Buyers’ Tax Credit. FABULOUS! This is something that REALTORS® have been talking about for a long time now, and have pushed through CREA's PAC. Downpayment assistance for first time home buyers who are on the cusp of home ownership, meaning they pay more in rent than they would if they owned and had a mortgage, is a great initiative. This is the type of policy that comes from the pressures exerted by the REALTOR community and makes me proud to be in this profession. Matching the federal FTHB tax credit is a nice icing on top.

5. A Secondary and Basement Suite Incentive, which will be a pilot project, whereby homeowners will be able to access a forgivable loan of 50 per cent of the cost of renovations, up to a maximum of $40,000 over five years. This is a cool idea, but I'm not sure it makes the difference for a lot of people. Ultimately, it does impact supply, but most people I know with apartments are looking to cover their costs and profit, rather than provide affordable options to the rental market. While this is a very creative and interesting policy solution, I remain concerned that those who avail will likely use government support to convert their basement into a rental for maximizing rental return, rather than providing affordable options.

Overall, I applaud the government for its action, no matter the timing - some action is better than none, and there are some very creative and good details in this policy announcement that could positively impact affordable housing issues. If you find yourself wondering how this policy announcement impacts your personal situation, I am a quick message or phone call away and always available to discuss your real estate.

In recent times, Canada has witnessed a notable shift in its interest rate environment, with the Bank of Canada gradually increasing rates. This upward trajectory has led to speculation about the potential effects on various sectors, including the real estate market. In this article, we will explore the impact of rising interest rates on the real estate market in St. John's, Newfoundland, and shed light on the changes that prospective homebuyers and property investors may anticipate.

Impact on Mortgage Affordability: One of the significant consequences of rising interest rates is the effect on mortgage affordability. As interest rates rise, borrowing costs for homebuyers also increase. This can lead to higher monthly mortgage payments, potentially reducing the purchasing power of buyers. Consequently, some prospective buyers may find themselves reconsidering their budget or delaying their home purchase, which could slow down the real estate market activity in St. John's.

Demand and Inventory Levels: Rising interest rates can influence demand dynamics in the real estate market. When rates increase, it often leads to a decrease in the number of potential homebuyers, especially among first-time buyers or those with tight budgets. As a result, the demand for properties may cool down, leading to a potential decline in sales volume.

Historical YTD Sales in St. John’s

Excluding June, which has just begun, sales YTD are down approximately 30% from records in 2022 and 2021, and only slightly elevated from pre-pandemic levels.

Additionally, rising interest rates affect the supply side of the market. Homeowners who have adjustable-rate mortgages or are in need of refinancing may experience higher borrowing costs, potentially discouraging them from listing their properties for sale. This reduced supply, coupled with decreased demand, creates a market with potential for significant downward adjustment on average pricing.

Historical YTD Supply in St. John’s

Again excluding June, supply is down significantly in the current market.

Impact on Property Investors: The real estate investment landscape in St. John's may also be influenced by rising interest rates. Investors who rely on financing to acquire properties may face higher borrowing costs, impacting their return on investment calculations. As a result, some investors may become more cautious or seek alternative investment opportunities. However, it's important to note that the impact on investors can vary depending on their specific strategies, financial situations and their location. In St. John’s, we have seen notable activity from out of province investors taking advantage of the cheaper prices here compared to other major cities across Canada for income properties that generate comparable rental rates, and thus better return on investment.

As Canada experiences a rising interest rate environment, the real estate market in St. John's, Newfoundland, will certainly change in response. The current market can be summarized as favouring sellers - anyone with a home to sell in a good neighbourhood and in reasonable condition can expect to have strong interest as demand remains above pre-pandemic levels, albeit cooling from the ultra hot years of 2021 and 2022. The lack of supply has supported elevated average price statistics, and multiple offer sales after short listing periods is not an uncommon occurrence. 

Prospective homebuyers and property investors should be prepared for potential shifts in mortgage affordability, changes in demand and inventory levels, and adjustments to investment strategies. Monitoring the local market conditions and seeking professional advice can help navigate these changes and make informed decisions in response to the evolving interest rate environment.