New mortgage rules were implemented in 2016, and among them, the first requiring first-time buyers to take a stress test to ensure that they would be able to make their mortgage payments should the interest rates rise and the second where buyers purchasing homes over $500,000 would need to put down a 10% down payment on the amount over $500,000.
Both rules were put in place to try to slow the market and ensure that buyers weren’t getting in over their head and later defaulting, being unable to afford the property. But, recent reports show that 2016’s new mortgage rules have not slowed the market or affected sales prices in the GTA at all. In fact, home prices are still rising in some of the more affordable parts of the GTA.
In November of 2016, approximately 8,500 homes were sold, up 16.5% from November of 2015. Prices also increased by a whopping 22.7% in the one-year time span.
This after the Canadian Real Estate Association predicted a 3.3% decline in home sales for 2017, citing the lack of inventory, the new mortgage rules and the deteriorating affordability in the Toronto and Vancouver markets. While we don’t know what lies ahead in 2017, and with February just beginning, January’s numbers may be telling. But, if it is anything like the end of 2016, prices and home sales will continue to increase.
The Toronto Real Estate Board released their Market Year in Review & Outlook Report 2017 yesterday. They make a number of key points when talking about the real estate market in the GTA for 2017:
Seller’s market conditions will remain in place due to a short supply of listings
· Strong rates of price growth
· Number of home buyers will decline
· Possible decline in sales
· First-time homebuyers will account for half of all sales in the GTA
· Home prices will grow by approximately 10-16%
Analysts suggest that the new mortgage rules did nothing to squelch investor activity, and these are the people who are driving the prices upwards. As well, many people just want to enter the market, regardless of the new mortgage rules, before it truly becomes unaffordable.
With a lack of listings in Markham and throughout the GTA, prices are still climbing, along sellers to determine the price point they feel they can get for their home, regardless of how inflated it truly is. The new mortgage rules did not address the lack of supply in the market, which meant that buyers were trapped in a no-win situation. Solutions need to be put in place to address the lack of inventory, in order to alleviate price hikes.