New rules cooling off home sales
OTTAWA—Canada’s housing market appears to be cooling across the board in the face of tighter mortgage rules that affect many first-time buyers of modest means, a new analysis from the Conference Board shows.
The think-tank’s snapshot of resales for August shows a widespread decline in sales of existing homes, with 21-of-28 metropolitan markets registering a drop from July, and 16 of the markets showing a fall off of five percent or more.
Senior economist Robin Wiebe of the Conference Board said there was evidence of cooling in some markets—particularly Vancouver and Victoria—before the new rules went into effect July 9.
But the new data shows the slowdown has spread to most markets and from coast to coast.
“When you see sales down in three-quarters of the market, that means it’s pretty widespread,” he remarked.
“It’s knocked down previously high-flying markets like Regina and Saskatoon down a peg.
“Vancouver had been showing signs of cooling, now it’s spread out into the Fraser Valley,” Wiebe added.
When Finance minister Jim Flaherty announced in July that the maximum amortization period for mortgage would be reduced to 25 years from 30 years, the government estimated it would increase monthly payments by $184 on a $350,000 mortgage.
It was the fourth time Flaherty tightened mortgage requirements in four years, but the measure was regarded as the one likely to be the most effective.
While sales and prices were only temporarily sidetracked by the previous announcements, only to recover a few months later, this might “be the one that broke the camel’s back,” said Wiebe.
Scotiabank economist Adrienne Warren said the cumulative impact of Flaherty’s tightening measures definitely are showing up in the numbers, but other factors are playing a role, including buyer fatigue and high household debt, as well as concerns about the economy.
“We had been anticipating a slowdown, but these new mortgage rules reinforced the slowdown, particularly for first-time home buyers,” she said.
“[The rules] are making it harder for them to get into the market.”
Still, the latest data shows that while sales and listings are down, prices appear to be holding steady.