A new report from Bank of Nova Scotia suggests that up to 10% of potential home buyers were blocked from entering the market due to Finance Minster Jim Flaherty’s mortgage rule changes. The report goes on to also state that the housing market will experience a ‘soft-landing’.
Although the past 12-months have seen home sales plunge in most markets, particularly resilient areas such as Vancouver and Toronto have in fact seen an increase or a nominal change respectively. In Vancouver, home sales climbed by almost 12%, whereas in Toronto, sales decreased a modest 1.0%.
Over the past several days, local real estate boards have reported a stabilizing market.
According to economist Adrienne Warren of ScotiaBank, “Canada’s housing market is proving remarkably resilient notwithstanding the barrage of negative headlines.” Warren went on to also state that “[o]n a month-to-month seasonally adjusted basis, we estimate national sales rose for a fourth consecutive month. Market conditions remain well balance: [a]verage prices are up 4 per cent year over year but have leveled out in recent months.”
A BMO Nesbitt Burns survey conducted by Pollara, inferred that the rule changes stabilized the market rather than executed it.
The survey revealed that almost 66% of first-time buyers did not alter their intent to purchase, while 19% stated that the will wait longer.
In my opinion, I believe the “stabilization” of the market has less to do with the mortgage rule changes, and more to do with the interest rates continuing to remain historically low, despite even the recent increases. It also appears that these rates will remain more or less consistent. Canada has not been experiencing the same level of job creation as anticipated based on first quarter figures, as job growth stalled in June with a net loss of 400 jobs; however, more telling was the fact that several thousand full-time jobs were cut, and part-time employment swelled, which kept the unemployment rate at 7.10%. This means the Bank of Canada has to be exceptionally careful increasing the overnight rate to ensure the borrowing, hiring and investing are not obstructed. Moreover, an emphasis remains on the long-term health of the United States and the Eurozone, which again points to no movement from the Bank of Canada until next year. Although the domestic and global economic landscape may shift in an instant, it is important to recognize that to engender a ‘soft-landing’, there needs to be a balanced change to our monetary and fiscal policy, which inevitably will take time.
Regardless, if you’re thinking about making a switch, purchasing a home, or refinancing your mortgage, contact your REALTOR® & Mortgage Broker, or feel free to give us a shout, and We’ll be happy to chat.
REALTOR® and Senior Private Loan Specialist - Residential & Commercial
Century 21 Desert Hills Realty and EQ Lending Corp.
Broker/Owner of EQ Lending Corp.