Bill, from the Properties in Victoria Professionals real estate team, sat down with Callum Greig of Prime Mortgage Works at his Victoria BC office to review what happened in the Canadian mortgage world in 2018 and how the changes introduced affected the consumer’s purchasing power. We also touched on what we may or may not see in 2019.
On January 1st, 2018 the Canadian Government introduced new mortgage and financing rules to try and slow down the dramatic appreciation in Canadian real estate prices that we started to see in 2016 and continued into the early part of 2018. Since 2008 the government has been putting in measures to try and limit the flow of money into the real estate market and in their minds protect the consumer and run away real estate prices.The first step, of the latest two regulation changes, was introduced in 2017. In 2017, a purchaser who was financing their real estate purchase by putting less than 20% down had to undergo a mortgage stress test. Meaning they would be approved at a rate of two percentage points higher then the best rate a bank would offer or the establish benchmark rate. Once approved they would receive the lower bank rate for the term of the mortgage. In 2018 the Canadian government expanded this regulation to anyone who was applying for a mortgage, no matter what the down payment was. In effect this new regulation reduced a consumer’s spending power by 20%, thus putting some buyers on the sidelines.
Over the latter part of 2018 we started to see the real estate market slow down. Prices started to stagnate and flatten out across Victoria and the rest of Canada and the number of real estate sales dropped by 20-25% in many regions across the country. In Victoria we realized a 20% drop in sales, an average price increase of 10% year over year, but with prices staying flat or down slightly since April of 2018.
Looking forward to 2019, we do not see any more government regulation changes; however, we will see Bank of Canada rate increases, but not as many as were predicted earlier this year. This will also play a role on pricing through 2019. Keep in mind though, with interest rates increasing and prices flatten or slightly down in 2019, the monthly carrying costs (mortgage payment) will stay the same or increase.
Royal LePage Coast Capital RealtyAll Articles More Like This