In a recent policy move, Canadian Finance Minister Chrystia Freeland announced two significant changes aimed at making homeownership more accessible in Canada's overheated real estate markets, particularly Toronto. These changes involve raising the insurable mortgage cap from $1 million to $1.5 million and extending the amortization period for insured mortgages to 30 years. This update applies primarily to first-time homebuyers and those purchasing newly built homes, taking effect on December 15, 2024.

Potential Impacts on Toronto's Real Estate Market

1. **Affordability Boost for First-Time Buyers**: The longer amortization period will reduce monthly payments, which can make buying a home less financially daunting for younger Canadians. This change comes at a crucial time when high-interest rates have squeezed affordability. With the average home price in Toronto above $1 million, these measures can open the door to more buyers, potentially helping to cool the rental market as well.

2. **Increased Demand for New Builds**: By focusing the 30-year amortization policy on newly constructed homes, the government hopes to boost demand for new housing projects. This could spur more development, particularly in the condo market, where the bulk of new residential construction in Toronto is concentrated. However, the demand surge might also drive prices even higher, making affordability a challenge despite the changes.

3. **Market Stabilization**: Freeland's announcement could stabilize the market by addressing both supply and demand. As developers might respond to increased demand with more construction, this could eventually help moderate home price growth, particularly in high-demand cities like Toronto. However, with limited land availability and rising construction costs, the effects may be slow to materialize

4. **RRSP Withdrawal Increase**: In addition to the mortgage changes, the government has raised the limit for withdrawals from Registered Retirement Savings Plans (RRSP) from $35,000 to $60,000 for first-time homebuyers. This additional flexibility could make it easier for younger buyers to save for a down payment, especially in markets where saving for a sizable down payment remains a significant barrier.

While these policies offer some relief, Toronto's real estate market is likely to remain competitive. The long-term impact will depend on how the broader economic environment, including interest rates and inflation, evolves over the coming years.