More housing inventory pushing developers to offer incentives like free mortgage payments

Home sales are starting to slow while construction continues apace, prompting some builders to offer new incentives. Nicole Weisberg reports.

A home builder is covering the first year of mortgage payments on houses it has built in Edmonton, Sherwood Park, Calgary and Airdrie.

Mattamy Homes is offering to cover up to $4,150/month for the first 12 months of ownership, either delivering the amount as a monthly payment or one-time lump sum.

“We are feeling a bit of the need, I think, to respond to microeconomic changes that are happening in the economy and also in the marketplace. Incentives like the mortgage incentive idea is really a pragmatic way for us to help people overcome whatever concerns are stopping them from getting off the fence,” the company’s vice-president of sales in Alberta, David Wan, said, noting the company’s research suggests a significant number of Alberta buyers receive help from their parents.

According to 2023 Statistics Canada data, 42 per cent of all homeowners reported their home was either part of a gift or inheritance, or that they received part of their down payment as a gift, inheritance or loan from family or friends.

Wan thinks the program would ease cash flow in the first year of ownership.

“(It) allows (home buyers) to have the freedom to pay back whoever it was that helped them with the down payment, or to use it in some other way that helps them,” he said.

Mattamy developed Edmonton’s Stillwater community in the southwest and Sherwood Park’s Hearthstone.

Homes eligible for the incentive include single-family homes, semi-detached homes, rear-lane townhomes and village homes.

A purchase agreement must be signed by April 26, and the home must be closed on by the end of the year.

Wan acknowledged one of the market factors Mattamy is reacting to is the softer market.

According to Darlene Reid, chair of the board of directors of the Realtors Association of Edmonton, inventory levels in Alberta’s capital are roughly 30 per cent higher than this time last year. Additionally, about a third of current listings are new builds.

“What we’re seeing is builders are carrying a lot more inventory than they typically do, so we’re seeing a lot more incentives being offered to buyers,” she told CTV News Edmonton.

However, she still called the market balanced and expects prices in most categories to rise. The association is forecasting slow and steady growth, albeit more modest than last year.

Although Edmonton remains one of Canada’s most affordable major cities, affordability in Alberta’s capital city worsened slightly between January and February, with the average home price increasing from $409,000 to $412,300, according to RateHub.

Its mortgage expert recommended interested buyers get pre-approved now, because the conditions may not remain attractive for long due to factors like the war in Iran and inflation pressure.

“We are in a rising fixed-mortgage rate environment,” Penelope Graham told CTV News Edmonton.

“So if you’re somebody who needs to take out a mortgage right now or you are renewing your mortgage over the next few months, it’s really imperative that you secure access to today’s pricing right now.”

To any potential home buyer considering an incentive, Reid advised: “These incentives are great to get people in the market, but buyers also have to be aware that’s just a short-term cost. The confidence comes from the long-term sustainability.”

With files from CTV News Edmonton’s Darcy Seaton and Nicole Weisberg