Stress tests push 1 in 3 homebuyers to give up: poll
Tougher mortgage stress TORONTO testing rules are pushing some homebuyers to lower their expectations for a new home and others to opt out of buying altogether. In a sign of the ongoing role government intervention is playing in the market, one in three Canadian homebuyers said they had decided to forgo a home purchase in light of the new mortgage qualification rules that came into effect January 1, according to a new Re/Max survey conducted by Leger. A quarter of buyers compromised on the size of their home, while 18 per cent made concessions on its location.
“It has definitely cut out the buying power of first time home buyers and prompted other consumers to rethink where and what they’re going to buy,” said Christopher Alexander, executive vicepresident and regional director for Re/Max. “If you could afford a house at a certain price point and that became unattainable in the last 18 months, you’re probably looking at a condo. If you still want a house maybe you have to consider a different area.” The new mortgage lending rules introduced by the Office of Superintendent of Financial Institutions (OSFI) require home buyers to prove that they can service their uninsured mortgage at the contractual rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada. They came on the heels of market-cooling measures — including a foreign buyers tax — unveiled by the Ontario government in April 2017.
Following these moves, sales volumes in the Toronto region slowed through the summer and fall and plummeted in early 2017 — particularly compared to the same period a year ago, when prices rose and bidding wars were commonplace. The OSFI stress test did not affect Western Canada’s major markets as much as other parts of the country, said Elton Ash, regional executive vice-president at Re/ Max of Western Canada. Nevertheless, a suite of new housing market interventions introduced by the B.C. government in February — including an increased foreign buyer’s tax and proposed speculation tax — have remained a concern for buyers, he said. “In recent weeks, the speculation tax has actually made some buyers hold off on purchasing, which may affect the housing market in the next few months,” Ash said.