Just as some housing markets in Canada were showing signs of returning to stability after years of uncertainty, Canada and the US have entered a trade war with economic ramifications that are uncertain.
“In some regional markets, homebuyers appeared to be slowly making their way off the sidelines through the summer,” says Canadian Mortgage Professional (CMP).
“But with the economy bracing for the impact of new threats on key sectors, could the trade war dampen that gradual recovery?”
Trade uncertainty inevitably shakes some buyer confidence, Toronto-based broker Micky Khaneka told CMP.
“I think that’s the unfortunate part about it,” says Khaneka. “Just when we think people are ready to get settled in and they’re a little bit more comfortable with these big once-in-a-lifetime decisions and they’re coming off the sidelines, something like that just makes them stop dead in their tracks, take a step back and really evaluate whether this is something that’s going to have a direct impact on them.”
Khaneka doesn’t see a huge immediate cooldown in home sales despite the latest threat to the Canadian economy, suggesting many buyers may be accustomed to trade chaos, pointing to the US trade war on Canada that arrived early last year, dominating headlines and fuelling fears of mass job losses from tariff-related shock.
“That doomsday scenario has so far failed to materialize,” says CMP. “Khaneka said buyers have slowly come to terms with the reality of trade tensions, with some buyers’ confidence likely to continue improving even in the face of the latest escalation.”
“When something just keeps going into the news over and over again, I think it starts to lose its impact,” he said. “I’m seeing that the confidence was just starting to come back. There are a lot more conversations.”
The turnaround in regional markets has been gradual, with improved affordability coming as good news for many first-time buyers, according to Khaneka and he doesn’t see purchasers in that group being affected much by the trade whirlwind if they don’t work in tariff-impacted professions.
“I’m noticing it personally that in terms of conversations that we’re having with first-time homebuyers, there’s been a lot more buzz about affordability questions, their preapprovals, how much people are qualifying for,” he said. “So, I’m definitely seeing an uptick.”
“That’s also been boosted by the new GST/HST rebate for first-time buyers, another measure credited with bringing people back into the fray.”
It’s too soon into the current trade war to even guess how long it could last and whether US President Trump has higher tariffs in mind to add to his existing levies on Canadian goods.
“Reports suggest the Canadian government is hunkering down for a dispute that could rumble on well past the US midterms in November, while economists also expect the crisis could keep Bank of Canada interest rate hikes on ice for the coming months,” says CMP. “That means variable mortgage rates are likely to hold steady, which is good news for buyers, although there are more question marks about fixed rates, particularly after recent upward pressure on treasury yields in the US.”
Khaneka believes buyers are likely to still see the upside to getting into Canada’s housing market, “although that could change if the trade crisis worsens or drags on.”
“Our preapprovals in the last couple of months have really taken an uptick and that shows that it’s not that there’s no interest. It’s just that people are waiting for the right opportunity,” he said. “And I feel like something like this, if there’s a long duration on it, I think we’ll all be impacted one way or the other. But on a short-term note, if someone’s not being directly impacted, people can look at this as an opportunity as well.”