According to Canadian Real Estate Association statistics, national home sales rose 1.9% from June to July, indicating that homebuyers have adjusted to new mortgage qualification rules.
“It certainly looks like consumers are slowly becoming accustomed to the B-20 mortgage qualification guidelines,” said Elton Ash, REMAX’s regional executive vice president. “It’s occurring a little later than we thought, and that seems to be the reason why inventory levels are dropping in the Toronto area.”
Adjusting to the qualification guidelines, according to Ash, means homebuyers have come to grips with the fact that they qualify for less house than they may have wanted.
“What’s occurring is they’re readjusting their expectations,” he said. “In other words, where they may have qualified previously to purchase an $850,000 home, they’re now looking at a $750,000 home. It’s not that they’re seeking secondary financing—because the only lenders not bound by B-20 are credit unions and private lenders—it’s reducing their overall expectations of what they can afford in the type of home they’re looking for.”
Not surprisingly, Toronto’s condo market has been white-hot all year, while aggregate sales statistics dropped dramatically. However, Ash also cautions that last year was an aberration and that the market appears balanced.
“It’s certainly good news overall. From a Canadian point of view, there were concerns in the past about a bubble bursting and there being a huge price drop. The federal government’s move to implement the stress test was, I think, appreciated from a Canadian perspective and it means an overall slowing of the market to more balanced conditions, which is healthy for anybody’s equity level. If you look at the stats this year compared to price increases five years ago, the majority of the country is still getting healthy returns. So a slowing of the market is really good news.”
Debbie Domingues, a sales representative REMAX Ultimate, says that market fundamentals in the GTA are strong enough to expect that the languid market through the first half of the year is safely in the rearview mirror.
“It’s a balanced market here in the GTA,” she said. “The thing is it’s not the houses that have lost value. The market is still expensive, homes are priced high, but it’s harder to get qualified. That’s why you see the houses sitting. It’s still a good market, that’s for sure. I think it’s going to be pretty steady and pick up. Prices are most likely going to go higher.”