Could the Canada-U.S. trade war create opportunity for first-time homebuyers?
Canada is bathed in economic uncertainty as tariffs escalate tensions with the U.S., but some real estate professionals say the chaos could mean opportunity for some first-time homebuyers.
Many people will pause major purchases in times of uncertainty. That could be over fears of job loss or waiting to see how the rising cost of certain goods could impact household finances.
Some first-time buyers who were thinking of making the leap may want to stay put as renters. After all, draining the bank account for the biggest purchase of one’s life at a time when the job market is struggling is scary.
But for those first-time buyers still willing to make the leap, reduced competition in the housing market may enable them to secure a home for a better price.
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Rishard Rameez, CEO and co-founder of Zown, is seeing properties sit on the market far longer than in previous years. A home that may have once sold in a week is now taking a month or more to sell.
“This has kind of created an opportunity for buyers to bargain,” he said. “There are no bidding wars like we usually have… As a first-time buyer, you can say ‘hey, I’m not going beyond this price. Either you take my offer or leave it.’ And more often than not, sellers are actually taking it.”
In some markets, such as Toronto’s condo sector, Rameez would even recommend potential buyers begin an offer at about five per cent below market value. For notoriously sturdy markets like Vancouver, though, Rameez said starting around assessed value might be smarter.
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Jeff Appelbe, a realtor in Vancouver, says tariff uncertainty will likely slow transaction volumes in the weeks to come.
“How much is impossible to predict,” he said. “As long as things feel uncertain or there is a ‘risk on’ feeling, people will likely slow their purchasing decisions in general.”
He’s also seeing a reduction in competition that’s already led to a win for one of his clients. He helped a buyer secure a Vancouver sub-penthouse this week as the only group submitting an offer. If the tariff threats hadn’t happened, Appelbe would have expected at least one or two competing bids.
Why could the current conditions particularly benefit first-time buyers? Because, Rameez said, folks who already own the home may want to hang on until a time where they could get a slightly better price for their current place to vault them further up the property ladder.
How do interest rates play into this?
High interest rates the Bank of Canada implemented to stave off inflation have slowed growth in home prices, and pushed prices down slightly in some markets. That’s because higher interest rates make it more expensive to borrow money — such as a mortgage from a bank.
The higher interest rates have also had a huge impact on mortgage payments for many existing homeowners, and some are struggling to hold onto their properties, Rameez said.
He believes many homeowners have been holding onto their properties, waiting until summer to sell. But now, the favourable conditions buyers were waiting for this summer may not happen because of the trade war. Some struggling homeowners simply can’t wait much longer to sell, which could push up inventory in a time with less competition, creating opportunity for buyers.
The Bank of Canada typically raises interest rates to fight inflation and lowers interest rates to make borrowing money easier and stimulate the economy and keep it growing. But with the U.S. trade war, the Bank of Canada will be fighting a recession brought about by higher prices for goods and potential layoffs, while trying to batten down inflation as the government hands out money as part of tariff relief measures.
Some analysts originally thought the Bank of Canada might lower interest rates gradually for the remainder of 2025. But now that the trade war is beginning, there is pressure for the bank to make more aggressive interest rate cuts.
“Had the country not been plunged into a trade war, there would have been ample reasons for the Bank of Canada to at least pause on its rate cutting path,” Avery Shenfeld, chief economist of CIBC Capital Markets, said in a report on March 7.
But gently positive economic data from the beginning of the year “is now in the rearview mirror,” Shenfeld said, adding he’s seen signs that the central bank is “on board” with further interest rate relief.
“It can’t reopen a shuttered factory with a few rate cuts, but it can support domestic demand as an offset.”
Those falling rate cuts could add buoyancy to the housing market, Appelbe said, and spur real estate activity if the cuts are enough for more buyers to afford enough of a lone to buy the home they want. But of course, that will be tempered by job losses and rising costs in other areas besides housing.
“If rates continue to drop it should could make for a spring rush that runs later than usual,” Appelbe said.
The long-term impact on housing
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These economic factors are coming together to make opportunity for buyers in the short-term, but some signs indicate the housing crisis may get worse a few years from now.
The tariffs have several implications for Canada’s housing sector. For one, more expensive building supplies would make building and renovation projects pricier.
Rameez said Canada’s pre-construction condo market is still feeling the effects of the pandemic, when rapidly rising building and labour costs paired with rapid interest rate hikes put some who signed deals in 2020 underwater by now.
As a result, some developers are less interested to take on new build projects with less certainty that the prices they charge today will cover all their costs.
Uncertainty and rising costs of building new homes today will mean a choke in supply three to five years from now.
“When pre-construction new build properties were selling like hotcakes four years ago, everyone was happy. They were getting a property and don’t have to pay a mortgage until four years later. But what’s happenign today is, given market conditions, the property prices have fallen — and banks aren’t willing to finance these properties at the prices that initally these homebuyers bouth them for,” Rameez said.
Nationally, the difference is about 10% on average — or about $70,000 on a $700,000 property.
“I think the delay in construction today will affect us significantly in four to five years, when there’s more people looking to purchase and less inventory,” he said. “Even though today it looks like housing prices are going down, it means there’s less incentive for builders to build. Which means there’s less inventory and we won’t be able to fulfill the demand and prices will shoot up again.”