The government has taken several actions to curb housing risks.

Let’s have a look at Ottawa’s actions since the 2008 recession:

October 2017

October 2016

1. OSFI requires smaller banks to perform a stress test requiring borrowers with less than 20 per cent downpayment to qualify for the Bank of Canada’s posted five-year rate.
2. Borrowers with a down payment at or above 20 per cent to meet these same eligibility requirements.

December 2015

June 2012

1. For these with less then 20 per cent downpayment, the maximum amortization period was reduced from 35 years to 25 years only.
2. A new stress test was implemented. To qualify for a high-ratio mortgage, a home buyer’s debt costs could be no more than 44 per cent of their income.
3. Home owners who are going to refinance their mortgage can now borrow a maximum of 80 per cent of a property’s value, down from 85 per cent.
4. Government-backed insured high-ratio mortgages were available only on homes valued at less than $1 million.

January 2011

February 2010

1. The maximum amount home owners could borrow when refinancing a mortgage has reduced from 95 per cent of home’s value, to only 90 per cent.
2. A new rule came out requires owners who are not living on a property. A minimum 20 per cent down payment if they needed government-backed mortgage insurance.

July 2008

October 17, 2017 – “The Stress Test” is now a requirement for uninsured mortgages as well.

Effective January 1, 2018, home buyers who intend to buy a house with more than 20 per cent downpayment, will have to qualify for their mortgage at a higher rate. In other words, they will have to prove they can make their commitment if interest rates rise. This is the Seventh time since 2008 that the federal government has made policy changes concerning mortgages. These actions have a significant impact on the amount home buyers can borrow, or the annual income needed to qualify.

Under the new rules, the minimum qualifying rate for uninsured mortgages will be the greater of Canada’s 5 year benchmark rate or the contractual mortgage rate plus two percent. To illustrate, if a family is looking to buy a property for $1,000,000, using 20 percent downpayment ($200,000), they need to borrow $800,000 in mortgage. Based of these facts, the family requires 140,000 in annual income to qualify. Based on the new regulation, the same family will need 180,000 in annual income in order to qualify. In other words, now they need higher income, or much more downpayment to qualify for the same $800,000 mortgage amount. This new stress test won’t apply to people renewing their uninsured mortgage. Canada’s Office of the Superintendent of Financial Institutions (OSFI) will also require lenders to enhance their loan-to-value (LTV) limits and restrict certain lending arrangements designed to circumvent LTV limits.

While the impacts of these new qualification requirements are unclear, Economic analysis from the BC Real Estate Association (BCREA) anticipates: “The impact of the new stress test requirement will be to lower the purchasing power of households by up to 20 per cent. Like past tightening of mortgage regulations, we anticipate that the market impact will be sharp but temporary. In the past, we’ve seen home sales decline in the three to nine months following the implementation of tighter mortgage lending standards, with the severity of the impact fading within one year. However, these new regulations impact a larger pool of mortgages and so the impact could be more significant than in the past,” said Cameron Muir, BCREA chief economist.

Dog Porter, BMO financial group chief economist, predicts that expended stress testing of mortgages will have a “significant dampening effect” on the housing market. The main market it could hit hardest is the “move-up” home buyers. The new announcement could also slow interest rate increases next year if the bank of Canada pauses to assess the impact of new borrowing rules, he said.

BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the September 2017 statistics.

Active listings VS sales for all neighbourhoods in Metro Vancouver, includes condos, townhouse and detached houses. Please see link below:

Metro-Vancouver Report September

VANCOUVER, BC – October 3, 2017 – Apartment and townhome activity is outpacing the detached home market across Metro Vancouver*. This activity helped push total residential sales above the historical average in September. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 2,821 in September 2017, a 25.2 per cent increase from the 2,253 sales recorded in September 2016, and a 7.3 per cent decrease compared to August 2017 when 3,043 homes sold. Last month’s sales were 13.1 per cent above the 10-year September sales average. “Our detached homes market is balanced today, while apartment and townhome sales remain in sellers’ market territory,” Jill Oudil, REBGV president said. “If you’re looking to enter the market, as either a buyer or seller, it’s important to understand these trends and use this information to set realistic expectations.” There were 5,375 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in September 2017. This represents a 12 per cent increase compared to the 4,799 homes listed in September 2016 and a 26.6 per cent increase compared to August 2017 when 4,245 homes were listed. The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 9,466, a 1.2 per cent increase compared to September 2016 (9,354) and a 7.5 per cent increase compared to August 2017 (8,807). “Detached homes made up 30 per cent of all sales in September and represented 62 per cent of all the homes listed for sale on the MLS®,” said Oudil. “This dynamic has slowed the pace of upward pressure that we’ve seen on detached home prices in our market over the last few years.” For all property types, the sales-to-active listings ratio for September 2017 is 29.8 per cent. By property type, the ratio is 14.6 per cent for detached homes, 42.3 per cent for townhomes, and 60.4 per cent for apartments. Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.   The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,037,300. This represents a 10.9 per cent increase over September 2016 and a 0.7 per cent increase compared to August 2017. Sales of detached properties in September 2017 reached 852, a 27.9 per cent increase from the sales recorded in September 2016 (666), a decrease of 33 per cent from September 2015 (1,272), and a decrease of 32.9 per cent from September 2014 (1,270). The benchmark price for detached properties is $1,617,300. This represents a 2.9 per cent increase from September 2016 and a 0.1 per cent increase compared to August 2017. Sales of apartment properties reached 1,451 in September 2017, a 19.1 per cent increase compared from the sales recorded in September 2016 (1,218), a 5.1 per cent decrease from September 2015 (1,529), and a 22.1 per cent increase from September 2014 (1,188). The benchmark price of an apartment property is $635,800. This represents a 21.7 per cent increase from September 2016 and a 1.4 per cent increase compared to August 2017. Attached property sales in September 2017 totalled 518, a 40.4 per cent increase compared to the sales recorded in September 2016 (369), a 4.8 per cent decrease from September 2015 (544), and an 11.6 per cent increase from September 2014 (464). The benchmark price of an attached home is $786,600. This represents a 14.5 per cent increase from September 2016 and a 1.1 per cent increase compared to August 2017.