BoC Hints at Aggressive Rate Drops, and 2 Canadian Cities Top Global List for Construction Costs

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Every Friday, Wahi brings you the most important real estate stories from the past week.

The Unintended Consequences of a Pandemic Renovation Spike

Looking for a fixer-upper? Better look beyond the big cities. Once a common onramp to homeownership, a new report by Re/Max Canada suggests most of the fixer-uppers in Toronto and Vancouver have already been fixed-up, thanks to a surge in pandemic projects, further contributing to the affordability crisis. The study points to an 8% spike in home renovation spending in Toronto and Vancouver between 2019 and 2023 as a major contributor to the scarcity of affordable homes in those cities. During the same period, building permits for single-detached homes dropped 24%, suggesting they are quickly becoming “unicorns” in those markets.

Bank of Canada Flirting with More Aggressive Rate Drops  

Tiff Macklem appeared in a flirty mood at the IIF-CBA Forum in Toronto this week, casting wanting glances at the attractive interest rates across the room. In his remarks the Bank of Canada Governor got the attending bankers excited about the potential of a major rate drop in the months ahead when he announced “it is reasonable to expect further cuts in our policy rate.” The Bank’s next opportunity to shoot its shot will be on October 23, but the question on everyone’s mind is whether Macklem will play it cool with another .25 cut or make a bolder move.

More Homes, More Problems

The market for new homes in Toronto is basically non-existent. According to a report by the Building Industry and Land Development Association, new home sales in the GTA hit record lows in August, with just 464 units changing hands across the region — including just 235 condo units. That represents a 46% drop from last August and 73% below 10-year averages, marking a new historic low for new home sales in the city. While single family home sales were down just 14% from last year, condo sales were down 61% from August of 2023, and sat 81% below the 10-year average.

Two Canadian Cities Top Global List They’d Rather Be Left Off 

When Toronto tops a global ranking it’s usually a good thing, unless it’s about housing. Unfortunately, the latest major list to put the city near the top was from the latter category. According to a new report by Australian price comparison service Compare the Market, Toronto ranks second for construction cost increases between 2020 and 2023, behind only Prague. According to the study, building costs surged 40.5% in the city over the pandemic years, thanks to higher borrowing costs and labour shortages. Calgary also made the list, coming in 5th place with a building cost spike of 28.5%.

New Details for New Mortgage Rules

Following last week’s major mortgage reforms, the Federal Government is back with some finer details. For example, with the cap on insured mortgages raised from $1 million to $1.5 million the Feds clarified that down payment minimums remain at 5% for homes under $500,000, and 10% for the portion between half and one and half million. That drops the minimum downpayment on a $1.5 million home from $300,000 to $125,000. The new 30-year amortization for new and insured mortgages, meanwhile, will be extended to Canadians who buy new properties, haven’t owned in the last four years, or are recently divorced.

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