Canadians looking to buy homes valued over $500,000 will soon be required to come up with larger down payments in a move the federal finance minister says is designed to ensure stability in Canada's biggest real estate markets.
Market watchers and home sellers predict the move -- in concert with other regulatory changes -- will have little impact on house sales and prices that continue to rise despite a fragile overall economy.
"Rather than a blunt instrument to cool the market, this is a targeted measure designed to deter a very small segment of buyers from stretching into the market with a very low equity position," said Robert Kavcic, senior economist at BMO Capital Markets.
Under changes announced Friday by Finance Minister Bill Morneau, home buyers will have to put a 10% down payment on the portion of the price of a home over $500,000.
Anything under $500,000 will still only require a 5% down payment. The changes are to take effect Feb. 15, 2016.
"This will impact 1% or less of the market," Morneau told a news conference.
For buyers in Toronto, where the cost of an average home has reached $625,000, the change will mean they'll have to come up with an extra $12,000 in order to qualify for mortgage insurance through the Canada Mortgage and Housing Corporation.
The new measure is aimed at expensive homes while still encouraging first-time home buyers to get into the market, said the minister.
"We recognize that, specifically in the Toronto and Vancouver market, we've seen house prices that have been elevated," Morneau said.
"And we want to make sure that we create an environment that protects the people that are buying homes so they have sufficient equity in their home."
The stiffer down payment requirement is one of three new measures targeting the stability of the housing market.
Financial institutions will face new capital requirements to keep pace with the growing risk of the real estate markets they bankroll.
And Canada Mortgage and Housing Corp. will change the fees it charges issuers of mortgage-backed securities.
While the intent of the government may be to tame Canada's real estate market, the market itself has been stabilizing over the past few months and is expected to cool in 2016, making Ottawa's moves redundant, said Gurinder Sandhu, the Ontario-Atlantic Canada vice president of Re/Max Integra.
"We're seeing the markets kind of take care of that on their own," he said.
"So, this type of regulation at this point in time wasn't really required.