The property market in Canada was cooling even before Ottawa
introduced tighter mortgage rules. In June existing home sales fell
by 1.3% compared to May, and by 4.4% compared to a year earlier. The
average house price declined by 0.8% compared to June last year to
$369,339. These new rules will make the market even tougher, as 16
out of the 26 markets posted a fall in sales last month.
Not surprisingly Vancouver tops this list, but four cities in
southern Ontario have also reported sales declines into the double
digits. The mortgage rules were introduced by Finance Minister Jim
Flaherty amid concerns about rising household debt and the
possibility of a housing bubble.
The new regulations mean borrowers will be
allowed to use up to 80% of their property's value as collateral for
home equity loans, whereas before they could have used 85%. In
addition the maximum amortisation period is now just 25 years for
government insured mortgages, down from 30 years. Government backed
mortgage insurance will only be available to homes with a purchase
price of less than $1 million. In contrast with other previously
introduced rules, there wasn't any rush by buyers to complete
property purchases before these new regulations came into effect.
Property prices in Vancouver have declined by 13.3% year-on-year
and it is very much a buyer’s market. Property prices in Toronto
have increased by 6.8% year-on-year, but the biggest gains have been
seen in Calgary, with increases into double digits and sales up by
16.7%. While economists cannot agree as to whether there will be a
substantial price correction, estate agents feel the decline in sales
activity combined with an increase in new listings has resulted in
the housing market becoming more balanced.
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