Category Archives: predictions

New mortgage rules to further cut demand

Southseacompany linked to this article forcasting the effect of new mortgage rules:

“In the year of implementation, we estimate that this new rule could depress demand by 5% to 10%, and shave 2% to 4% off of our current forecast for the average price level in 2018,” the authors said, as the proposed measures will act as another force that limits price growth in the future.

Those consumers, who often have as little as five per cent down, must qualify based on the posted five-year rate of the Bank of Canada, which is currently 4.84 per cent.

The economists suggest changes to tighten the rules on non-insured mortgages will lead buyers to “come up with a bigger down payment, opt for a lower priced home and scale back other debt,” and may even delay purchases all together.

Read the full article here.

CMHC keeps crying ‘Wolf’

The Canadian Mortgage and Housing Corporation keeps on giving the national real estate market it’s worst possible rating. You can probably guess which cities get singled out as the most at risk:

CMHC’s valuation is part of its quarterly Housing Market Assessment, something the Crown corporation calls an early warning system, alerting Canadians to areas of concern developing in housing markets so that they may take action in a way that promotes market stability.

In terms of the 15 individual markets studied, CMHC said it saw strong evidence of overall problematic conditions in Victoria, Vancouver, Saskatoon, Hamilton and Toronto – the same five markets singled out a quarter ago.

CMHC defines problematic conditions as imbalances in the housing market that occur when overbuilding, overvaluation, overheating and price acceleration, or combinations of those issues exceed historical norms.

Read the full article here.

Sales slow, but what about prices?

An article over at the province says that real estate sales in Vancouver and Toronto have slowed, but don’t expect prices to follow:

“We’ll still have very lofty prices in Toronto and Vancouver. If we’re expecting the market to become instantly affordable that’s not going to happen. Given the low interest rates and rapid population inflow, they will still be expensive markets but we’re moving away, thankfully, from the days where there was incredible pressure for buyers to get in before prices grew another 40 per cent,” Bank of Montreal senior economist Douglas Porter said.

read the full article here.

OMG OSFI!

YVR pointed out this article by Rob Mclister about the OSFI B-20 bombshell:

The new OSFI’s stress test rules will make 20% of the mortgage market not qualify or they will have to reduce their mortgage by 18% to qualify. That is before recent and future mortgage rate increases are factored in.

Roughly 80% of new big bank lending in the richly valued Toronto and Vancouver markets is low-ratio mortgage lending

OSFI’s stress test, as proposed, would slash buying power for prime buyers by roughly 18%

For non-prime borrowers, qualifying rates would immediately rocket into the 6% to 7% range

Read the full article here.

Business is ready for a rate hike

Lots of key indicators are telling the Bank of Canada that it’s time for an interest rate hike.

After the survey’s release, the chance of a July rate hike rose to 84 per cent from about 70 per cent, according to Bloomberg. Nine of 16 economists polled by Bloomberg now expect the central bank to raise rates to 0.75 per cent in July from the current 0.5 per cent.

The survey is one of the key pieces of information that Mr. Poloz and his central bank colleagues use to set monetary policy.

It was conducted between early May and early June, just before Mr. Poloz and his deputies started publicly saying the economy has turned the corner from the devastating oil price collapse that began in 2014.

Read the full article here.