New mortgage rules did not cool down the market
It was interesting to see that after the Feb 15 announcement regarding changes to the down payment required for properties above 500K, the government expected that the housing market would cool down. Quite the opposite is happening.
I spoke with realtors and they stated that clients selling properties below the 500K value are attracting more buyers than before. One listing agent even said for a property in Ajax selling for 430K - single detached, 1500 sq ft size, getting 17 offers above asking is not really heard off.
The buyers who can afford the 500K plus properties and who does not have sufficient down payment under the new rules are being forced to look for a lower priced property. within their downpayment reach. You can also read more about this topic from the link shown below.
Construction intentions for multi-family dwellings in Montréal continue to climb
In October, the value of permits for both single-family and multi-family dwellings increased in the CMAs of Montral and Toronto. However, in the Vancouver CMA, both residential components fell, offsetting the gains in September.
Municipalities in the CMA of Montral issued $538.1 million in permits for multi-family dwellings in October, higher than in Toronto ($409.2 million) and Vancouver ($330.6 million). In regards to single-family homes, Toronto registered $451.3 million in permits, followed by Vancouver ($148.1 million) and Montral ($122.4 million).
The Montral CMA issued permits approving the construction of 2,956 new units, stemming mainly from multi-family dwellings (2,720). October marked the fifth consecutive month where the number of units approved for multi-family dwellings exceeded 2,000. Vancouver approved the construction of 1,860 new units for multi-family homes, while Toronto (1,691) approved fewer despite having a higher value for the component.
Housing Market Digest by Will Dunning, Economist for Mortgage Professionals Canada
The Office of the Superintendent of Financial Institutions (OSFI) now requires that all residential mortgages by federally-regulated lenders must be stress-tested, at two percentage points above the contract interest rate (or the 5- year posted rate, if that is higher). In combination with the requirements for mortgage insurance, about 90% of all new mortgages will be tested.
This can be expected to reduce housing activity by 10-15%. It is on top of the impact from recent rises for mortgage interest rates (another 5-10% drop in activity). The combined 15-25% drop in housing activity will affect the broader economy.
In two years, employment could be 150,000-250,000 lower than it would otherwise be. There is a risk that house prices will fall. In a modern economy, a sustained drop in house prices is one of the most dangerous things that can happen: as happened in the US a decade ago, falling house prices can turn into widespread economic decline.
Resale activity recovered a bit more in September, to 492,900, due to partial rebounds in BC and Ontario. Activity is flat in most other areas.
CREAs House Price Index was flat in September. The year-over-year change is now 10.7% (down from the peak of 19.7% that was seen in April).
The sales-to-new-listings ratio (SNLR) was 55.7% in September, slightly above the balanced market threshold of 51%. This indicator points to an outlook for stable prices (at worst). But, as noted, OSFIs stress test policy creates a risk of falling prices.
We should, in general, expect that resale activity will trend upwards over time, because the population is growing and the housing inventory is expanding. Therefore, it is useful to look at sales on a per capita basis. Recent activity is below the long-term average.