October 6, 2016 | Uncategorized

We have been watching attentively to the changes to the housing rules and reading some of the banter within our industries.  Although the time constraint is somewhat of a shock, we don’t think the news of corrective legislature is all that surprising. As of yet, there are still some uncertainties in how things are going to pan out so much of the news circulating is based on speculation at best. What we do know for certain, is that the changes are being made to insured mortgages (those purchases with less than 20% down and low-ratio insured mortgages such as certain mono-line products). The average consumer with 20%+ down will not be as affected come the October 17th deadline.

While the changes are somewhat dramatic and will obviously change the way we do business, this is hardly the last nail in the coffin for Toronto real estate. Every change that has been imposed since 2008 (and definitely before that time) has had similar impact and of course, our markets have come out on top and safer because of them. We have no doubt that these changes will create different opportunities in the market, including those whose purchases flirt within the $1M mark as mild market cooling can make that space less competitive.

As of right now, the biggest impact is going to be on foreign buyers who are fleeing the Vancouver market and will now be held more accountable for abusing the principal residence tax exemption as well as buyers with less than 20% down.

The Bank of Canada Benchmark Rate (currently 4.64%) has been used to stress test variable rate mortgages and fixed rate mortgages less than a 5-year term for quite some time. But with this stress test being applied to 5-year fixed mortgages as well, it has been estimated that these changes will affect some clients’ affordability by up to 25% and eliminate the bottom 20% of eligible buyers in Ontario (these include small purchases across the province and not just downtown lower-priced condos).

Much of what we know at this time is speculative and in no way a guarantee of these changes and their effect on the Toronto real estate market.

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