The magnificent house price bubble wheezes.
By Steve Saretsky, Vancouver, Canada, Vancity Condo Guide:
With 2017 mortgage pre-approvals having now expired, the first wave of buyers facing OSFI’s ground breaking mortgage regulations are being put to the test. The regulations, also known as B-20, require all borrowers to pass a stress test at an interest rate 2% higher than the qualifying rate.
Early symptoms appear rather obvious. National home sales slid for the month of March, falling 23% year over year, and pushing the average sales price down 10%. Overall, it was a bearish quarter for Canadian housing, first quarter sales fell 16% year over year.
Much of the declines were felt in the single family housing market in Vancouver & Toronto, with many buyers unable to qualify at the recently inflated prices. The average sales price of a single family home in Greater Vancouver now sits at C$1.6 million and C$1 million in the Greater Toronto Area (GTA).
Chief economist of the Canadian Real Estate Association, Gregory Klump, noted the squeeze as “tighter mortgage lending rules, which make it harder for home buyers to qualify for uninsured mortgages, are also shrinking the pool of qualified buyers for higher-priced homes.”
To little surprise this reflected in the national home prices across Canada. The Q1 2018 average sales price declined by 6.27% from Q1 2017. It was the first year-over-year percentage decline since Q1 2009.
The impact of the mortgage stress could become more apparent moving forward, particularly if borrowing rates continue to rise. As of today, a homebuyer hoping to purchase the typical home in Greater Vancouver (as per the MLS benchmark price of C$1.084M) would require a minimum down-payment of C$216,800 and a verified income of C$175,000, assuming a 5-year mortgage at a generous 2.99% interest rate.
Is it any wonder prices of one bedroom condos continue to rise? The median price in Greater Vancouver hit a record high of $540,000 in March.
“Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb,” said CREA’s Gregory Klump. “As a result, ‘affordably priced’ homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up home buyers.” By Steve Saretsky, Vancity Condo Guide
Big Six Banks’ out-of-control “Mobile Mortgage Specialists” on commission. Read… Government of Canada Just Pointed Out Mortgage Market Might Be a Cesspool
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