Morgan: New mortgage rules put damper on rising real estate prices
Canada’s neighbouring countries have gone into major economic recessions, each financial crisis signalling what appears to be a long dark road back to any sort of stabilization.
The recession also hit Canada back in 2008, which was like a light switch that turned off our real estate market boom.
It was recently reported by The Canadian Real Estate Association, however, that forecasted sales prices were showing a predicted increase of 2.2% from 2011 and rise another 2% in 2013.
So just when homeowners now start to consider that the market is on the cusp of stabilization after several years of disappointing sale prices and escalating inventory, Canada’s sales numbers started to reflect a cool down possibly across the country, likely due to Finance Minister Jim Flaherty’s imposed adjustments to our mortgages rules.
Flaherty announced July 9 that there will be major changes with our mortgages rules, such as reducing the maximum amortization for a government-insured mortgage to 25 years from 30 years and reducing the amount of equity homeowners can take out of their homes in a refinancing to 80 per cent from 85 per cent. These changes were implemented in hopes of avoiding another ‘bubble’ bursting.
Chief economist Avery Shenfeld, of CIBC World Markets, stated: “These latest steps to tighten mortgage rules are part of efforts to avoid one of the negative side effects of having very low interest rates for a long time.”
Results show that the larger cities such as Toronto and Vancouver have been feeling a slight cool down in the market in recent months, but this cool down has spread across Canada affecting some of the more booming cities such as Saskatoon and Regina.
Statistics are reflecting that Flaherty’s aggressive changes are responsible for that.
But have the brakes been slightly tapped or are we just simply forced to continue down this long road of our economic drawback as recently forecasted by variety of different economists?
Are the changes to the new mortgage rules the culprit for a decrease in sales across Canada?
Or have we just caught a glimpse of today’s new world of lower prices, high inventory and fewer qualified buyers?
Ceinwen Morgan has worked in the Kelowna real estate industry for the past five years.