‘Tougher’ for homebuyers
Experts believe mortgage rules will be tightened in 2012
OTTAWA — Canada’s government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a poll, who also see prices stabilizing this year but no dramatic collapse.
Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.
They expect home prices to stall with a mere 0.1 per cent climb in the year to December 2012, and the same in 2013. That is down from a 0.9 per cent year-on-year increase in December 2011.
The results were similar to another Reuters poll last month that suggested the five-year slide in U.S. home prices would end this year, followed by a weak recovery in 2013.
If Finance Minister Jim Flaherty tightens requirements for government-backed mortgages it would be his fourth intervention in the real-estate market since 2008.
He could raise the minimum down payment on a home from the current five per cent or reduce the maximum amortization period from30years.thebudgetisexpected in late March.
The poll respondents see the housing market as moderately overvalued, particularly in Toronto and Vancouver.
“There is some genuine concern thatthehousingmarketandhouseholds have been overstretched,” said Mazen Issa, economist at TD Securities. “But in the absence of several triggers for a housing market decline, which are not likely to be forthcoming until at least the middle of next year, the underlying theme is of gradual moderation.”
Possible triggers would be a rise in mortgage rates or a sharp rise in unemployment.
Canada’s robust housing market helped pull the economy out of the 2008 recession. But now, household debt levels are nearing those in the U.S. before the 2008-09 housingmeltdownthere.canada’sdebttoratio hit a record 153 per cent last year and is expected to rise.
The Bank of Canada, which has fanned the flames by holding its benchmark lending rate at one per cent for an unprecedented 17 months, has made it clear that rates are likely to stay unchanged for at least this year.
Of the nine forecasters asked how far prices would fall before stabilizing, the median decline was five per cent, with four predicting prices won’t stabilize until after 2013.
Theeconomistsseeamoderation in housing starts to 190,000 units in the first quarter of 2012, compared with a seasonally adjusted annualized rate of 197,900 units in January. Housing starts should ease to 181,000 by the second quarter, they said.
Butthenationalaverageisskewed by Toronto and Vancouver, where foreign investment has helped push up prices.
“I would say aside from those two cities, there’s really little evidence whatsoeverthatthemarkethasgotten ahead of itself,” said Doug Porter, deputy chief economist at BMO Capital Markets.
Vancouver prices have already started sliding. The outlook of the half-dozen analysts who ventured a forecast on that city was for a three-per-cent drop this year and a 4.8-per-cent fall in 2013.
In Toronto, where the activity ramped up later, prices are seen edging up 0.3 per cent this year before falling two per cent next year.