TREB calls on government to revisit mortgage stress test
The board says stress tests have priced out potential homebuyers
TORONTO — Canada’s largest real estate board is calling on Ottawa to revisit whether a stricter mortgage stress test introduced last year is still needed, arguing that the policy has negatively impacted the economy and Toronto’s housing market.
“While we saw buyers return to the market in the second half of 2018, we have to have an honest discussion on whether or not today’s homebuyers are being stress tested against rates that are realistic,” said John DiMichele, chief executive of the Toronto Real Estate Board (TREB) in a statement Wednesday.
“Home sales in the GTA, and Canada more broadly, play a huge role in economic growth, job creation and government
revenues every year. Looking through this lens, policymakers need to be aware of unintended consequences the stress test could have on the housing market and broader economy.”
Stress tests were introduced in 2018 to cool real estate markets such as Toronto and Vancouver, and have limited the ability for some to qualify for mortgages.
TREB, which represents more than 52,000 real estate agents across the region, says potential homebuyers who moved to the sidelines when the mortgage stress test came into effect will likely re-evaluate their financial qualifications and try to enter the market this year.
It notes that the stress test, which is mandated through the Office of the Superintendent of Financial Institutions (OFSI) has resulted in homebuyers having to qualify for monthly mortgage payments nearly $700 more than what they would actually pay.
“In order to account for the higher qualification standard, intending home buyers have adjusted their preferences, including
the type of home they intend on purchasing,” said the report, resulting in the increased popularity of condos and townhouses over detached homes.
Despite challenges, TREB forecasts in its annual outlook that it expects to see a “moderate improvement” in sales and selling price this year in Toronto’s real estate market but says it doesn’t anticipate to hit the record levels seen in past years.
The board says increased buying intentions will be helped by population growth, low unemployment rates and lower fixedrate mortgage rates this year.
The outlook forecasts that 83,000 sales will be reported through the board’s Multiple Listing Service (MLS) system in 2019, up 7.2 per cent from 77,375 sales recorded in 2018.
TREB expects the average selling price for the year in Toronto and the Greater Toronto Area will increase to $820,000 — close to the peak reached in 2017 — and up from an average of $787,195 in 2018.
Much of that price growth will
be led by the hot condominium market as homebuyers look for more affordable housing options, while the board anticipates the price growth for detached properties to be below the average growth rate for the total market.
Meanwhile, the board expects new listings will remain flat this year after the figure pulled back in 2018 to sit between 155,000 and 156,000.
The report also cautions that the rental market in Toronto and the surrounding area will remain “tight” this year.
“The supply of rental units could continue to be problematic in 2019,” it warned.
The board also reported that home sales in Toronto and the surrounding area saw a small uptick in January, a sign that the real estate market in Canada’s largest city remains stable.
In a separate report, TREB says there were 4,009 home sales recorded in January, up 0.6 per cent compared with January 2018. On a seasonally adjusted basis, sales were up by 3.4 per cent versus December 2018.