The question of how much the new mortgage regulations implemented earlier this year would impact real estate sales is finally gaining concrete answers, as new data on the Canadian housing market emerges.
According to an RBC Report published on the 6th of March, New stress test really testing local housing markets in Canada in February, national home sales have taken a steep plunge since the introduction of a stress test for all (insured and uninsured) borrowers.
In Toronto, sales have dropped by 25% relative to a year ago. When adjusted to a seasonal basis, this is the lowest February sales record in the past 8 year.
Vancouver similarly experienced the lowest volume in sales in the past 8 years, and the slowest annual benchmark price in the past 5 year (3.2%). However, prices continued to rise since demand-supply continues are still quite tight despite cooling sales.
In Calgary, prices dropped by 18% compared to February 2017.
Victoria experienced a 19% decline in sales.
Montreal on the other hand recorded a 5% year-over-year gain in February, albeit a slow-down compared to the 13% rise in January. The seasonally-adjusted basis declined for the second month in a row. Prices have remained intact despite a slight increase in supply and decline in demand.
The report speculates that it might take a while for the Canadian real estate market to bounce back.
“Our view is that the more stringent qualifying rules for uninsured mortgages that came into effect on January 1 had a significant impact on home resale activity across Canada over the past few months. We believe that it brought forward many buying and selling decisions toward the latter stages of 2017, and caused others to adopt a wait-and-see approach in the early stages of 2018. We expect the effects of the new rule to ease gradually in the coming months and activity to recover partially.”