It’s been a challenging time for many Canadians, as we work together to beat the coronavirus pandemic in our communities. Remember: we’re all in this together! While health and safety parameters such as social distancing have affected the economy, real estate continues to be an essential service.
Depending on your financial situation and the government’s interventions to bolster the economy, first-time homebuyers may be encouraged to set their sights on ownership. While there has been a dip in activity, with fewer home sale transactions in March across major Canadian markets, there are opportunities to explore.
In response to the pandemic, real estate agents are leveraging technology such as 360 or 3D virtual tours and e-signatures, and remote closing to facilitate transactions. So, if you’re a first-time homebuyer hoping to make a home purchase, now may be a good time to dip your feet into the market.
Here are a few ways that first-time buyers may benefit from purchasing a home now:
Bank of Canada Slashes Interest Rates
The Bank of Canada has made several interest rate changes over the past few months in response to the coronavirus outbreak. The government made the decision with the purpose of softening the blow of the pandemic to the economy. Real estate is one of Canada’s largest economic sectors, and the lowered interest rate may encourage more Canadians to purchase a home.
In March, The Bank of Canada had slashed the rate from 1.75% to 1.25% which had ignited activity in home purchases especially in more expensive markets. Since then they have made even more reductions. Currently, the benchmark rate sits at 0.25%, the lowest it’s ever been. This is good news for first-time homebuyers who have struggled in the past to qualify for a mortgage due to the mortgage stress test and higher interest rates. Now, first-time buyers can borrow the funds they needed from mortgage lenders and have lower mortgage payment and pay less in interest over time.
We can expect another interest rate announcement from the Bank of Canada on June 3rd, 2020.
Other government incentives such as the First Time Home Buyer Incentive and the first-time Home Buyers’ Plan will help first timers take the leap into home ownership.
These measures may be able to help first-time buyers qualify for larger mortgages. This also means they can get more of the home features that they desire, such as a larger home with more square footage.
Beat Out the Market Competition
While Covid-19 may have slowed some real estate market activity, this can actually be beneficial for first-time homebuyers hoping to put an offer on their dream home. Buyers have the option of connecting with their realtor digitally and pushing forward with virtual deals which means using other tools to engage in the market since open houses have been put on hold for the time being.
Those willing to adapt and use technology can continue their home search and close the home sale remotely. It may seem like a strange time to consider purchasing a home but under the right circumstances, it could be a smart financial decision.
Although there are many people who are taking a wait-and-see approach to the real estate market, this can be an advantage for homebuyers willing to brave current market conditions. This is because fewer buyers shopping for homes means less competition. Sellers who are keen to sell quickly may be more open to negotiating and lowering their purchase price. This could temporarily pivot the market from a sellers’ market to a buyers’ market.
Prior to the pandemic, market activity was red-hot in many of Canada’s top markets such as Toronto and Vancouver. Now could be the time for buyers to secure a home and get a better deal.
Economic Downturn? No Problem
Those purchasing a home for the first time in this market won’t need to be concerned with selling a home you previously owned to finance a new one.
If you’ve already saved a down payment in cash and it’s not tied up in other investments, you may not be affected by an economic downturn. If you have job security in your current role and have access to the financing you need, this could be the right time to make a purchase.
Being a first-time homebuyer now means you can take advantage of low interest rates and less competition. In contrast, other homebuyers may be wondering if they will be able to sell their current home in this market and use the equity to purchase a new home.
These challenging times do not mean that it is necessarily a bad time to buy a home. Those who are willing to brave current market conditions can find plenty of opportunities to get ahead of the market and find savings. When social distancing measures loosen, the demand that was previously there may return.