Watch the full Episode here ▶️ on YouTube
Overview:
In this episode, Steve Saretsky explores how rising mortgage rates, changes to rental financing policy, and persistent government deficit spending are shaping Canada’s housing market—particularly the Vancouver house price index. Saretsky unpacks the dynamics behind falling rents, high vacancies, and the shifting environment for buyers and developers in today’s market.
Rental Market Dynamics:
- From 2020 to 2023, double-digit rent increases were driven by record immigration and limited housing supply.
- Recent federal policy reduced the number of non-permanent residents, dropping Canada’s annual population growth from over 1.2 million to nearly zero.
- Rapid rent growth over the past few years helped fuel higher resale prices and unprecedented new rental development.
- However, rents have now declined for nine consecutive months in major cities, with Vancouver rents falling approximately 10% from their 2023 peak.
- This rent deflation is putting pressure on “mom and pop” landlords, who are facing rising vacancies, slower leasing times, and diminishing cash flow.
Government Policy and Construction Financing:
- The CMHC rental financing program previously allowed developers up to 95% loan-to-cost or value, with 50-year amortizations backed by government insurance.
- As a result, nearly 88% of current rental construction projects relied on CMHC-backed funding.
- Recently, the federal government raised CMHC insurance premiums, increasing costs for developers and signaling a soft policy reversal on subsidized rental growth.
- This shift adds risk and cost to new projects, contradicting public messaging around affordable housing support.
Ready to Buy in Vancouver? Work with a Team That Sees What Others Miss
Buying a home in today’s market isn’t just about finding the right place—it’s about understanding the timing, the data, and the risks.
The Saretsky Group brings a strategic edge to homebuyers in Vancouver and beyond, backed by deep market insights and real-time analysis.
✔ Personalized guidance for first-time and repeat buyers
✔ In-depth knowledge of Vancouver’s shifting neighborhoods
✔ Data-driven strategies to help you buy with confidence
Let’s talk about your next move.
Take Control of Your Investment Strategy! Book a consultation today and learn how to optimize your real estate portfolio.
Mortgage Rates, Bond Yields, and Government Deficits:
- A wave of mortgage renewals is approaching in 2025–2026, just as the federal government faces massive refinancing due to pandemic-era borrowing.
- Despite economic headwinds, 5-year bond yields have remained flat, suggesting that deficit spending continues to provide a liquidity boost.
- Mortgage lenders are offering fixed 5-year rates around 3.99%, which may be appealing for buyers despite broader uncertainty.
- Continued borrowing is supporting higher asset prices—stocks, gold, and Bitcoin are all climbing alongside real estate.
Housing Market Outlook and Buyer Advice:
- The housing correction is entering its third year, with inventory remaining high across many market segments.
- Market sentiment is deeply negative, which may present an opportunity for buyers with patience and negotiation power.
- While prices could fall further, historical trends suggest that those who buy during fear cycles tend to benefit in the long run.
- Saretsky compares the current correction to the post-2006 U.S. housing cycle, where early buyers still came out ahead over time.
Recommendations / Advice:
- For buyers: Now is a time to negotiate. High inventory and pessimism create potential entry points in the market.
- Fixed mortgage rates near 3.99% may offer value, especially when viewed through the lens of long-term deficit-driven inflation.
- Be aware that housing corrections can be prolonged, but well-timed decisions often yield strong returns over a multi-year horizon.
Questions investors should be asking:
- How will future policy changes affect rental housing development and pricing?
- Can government deficits continue without materially raising borrowing costs?
- What will further declines in the Vancouver house price index mean for both investors and first-time buyers?
