Mortgage brokers are preparing for more uncertainty on the horizon as Canada’s relationship with the US shows little sign of improving and further tariffs loom into view.
Current Canadian prime minister Mark Carney had a phone call with Donald Trump last week that the US president described as “extremely productive”, but April 2 marks the date that further US levies on Canadian imports are set to come into play.
With the barrage of constant updates, a sense of nervousness has taken hold of the housing market. “It's like trying to catch a falling knife,” Taz Zaide, a mortgage agent with 6ix Mortgage, told Canadian Mortgage Professional. “You're never going to be able to catch it exactly how you want it.”
The reality of tariffs has led to housing market concerns, previously a top priority for voters, falling by the wayside. A recent poll conducted by Abacus reported that housing had slipped to fourth on the list of priorities in the upcoming federal election, with tariffs featuring in second place after the cost of living.
Leading voter concerns
- 1. Reduce cost of living (45%)
- 2. Dealing with Donald Trump (33%)
- 3. Improving Canada’s healthcare system (20%)
- 4. Making housing more affordable (19%)
- 5. Growing the economy (17%)
Zaide said a trade war is not ideal if leaders want to address the struggling housing market. “People are already fed up and there's a lot of people coming up for ‘[mortgage] renewal right now as well; they are all kind of relying on a solid housing outlook.”
A potential inflationary spike if tariffs come into play, Zaide said, could reduce the Bank of Canada’s scope to cut interest rates.
Brokers must work around the volatility, he added. “Policy shifts can create opportunities. They may create risks as well.”
Will proposed tax cuts offer a reprieve to beleaguered homebuyers?
Political leaders have promised GST cuts on home purchases to provide potential buyers with some reprieve. Conservative Party leader Pierre Poilievre has proposed cutting taxes on homes worth up to $1.3 million, while Carney’s $1 million proposal would apply to first-time buyers only.
But Zaide said these cuts wouldn’t do much to improve affordability. “I don't think it's going to be enough to really move the needle,” he said.
The main issues around homebuying amid the current crisis don’t concern downpayments but rather qualification, he said, with many people in tariff-affected industries facing tighter rules.
BMO announced last week that those in the steel and aluminum industry now fall under a “limited appetite” industry and will face more reserve lending rules, a move that Zaide said may signal further qualification issues.
Addressing housing crisis while dealing with tariff war: a ‘paradox’ facing Canada
Prof. Vik Singh, an expert in Canada-US trade relationships and housing markets said that improving the health of the housing market and addressing tariffs cannot happen at the same time. “We are in this paradox right now.”
The challenge of addressing those competing priorities is already well known in the industry. In a February press release, the Canadian Home Builders Association (CHBA) said Trump’s tariffs, and potential future countermeasures, could have “substantial effects on the costs of home construction,” particularly when it comes to the cost of imported construction materials such as aluminum, steel and ceramics.
“We aren’t addressing the elephant in the room: the imbalance between supply and demand,” said Prof. Singh. With high building costs, he said that investors don't see a reason to invest in new housing starts. “It's a messy situation.”
Singh warned about the tariffs having a particularly potent effect in Ontario, where recently re-elected premier Doug Ford has become one of the most vocal opponents of Trump’s tariff policies. Publications like the New York Times have labelled Ford “Captain Canada”, noting his major support of counter-tariffs.
“We have to run through every tariff and minimize the pain for Canadians, maximize the pain for Americans,” Ford told reporters last week.
But Prof. Singh warned that Ontario’s housing market will also feel the pain. “Ontario is in deep trouble.”
In Toronto where average prices for homes are over $1 million, Singh said the proposed GST cuts are “a cherry on top” but won't make much of a difference.
It remains to be seen whether Ford’s zeal in opposing Trump’s tariffs will push previous promises, including a 2022 pledge to build 1.5 million homes over a 10-year period, to the background.
The way forward on tackling the housing crisis amid trade war
Singh said that before the housing market can truly heal, tariffs will have to be addressed. Relying on other partners and becoming less dependent on the US will be the way forward, he said.
“We have to create an ecosystem.”
For now, Zaide said brokers should stay on top of the changing news to educate buyers and referral partners. “Educating your referral partners will make sure that they can provide value to their client, so they're not scared off in the market,” said Zaide, “The outlook of the market is changing so rapidly right now.”
CMP
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