Tougher Mortgage Rules Deflating Toronto Housing Market
Toronto’s housing market keeps cooling off with sales falling sharply, but prices remain stable in aggregate, according to the Toronto Real Estate Board’s monthly news release.
Home sales in the Greater Toronto Area (GTA) for February fell 35 percent compared to last year. New listings were up 7.3 percent from a year ago. The benchmark price edged higher by 3.2 percent year-over-year for the market as a whole, driven by strength in townhouses and apartments, which were up 7.5 percent and 18.8 percent respectively. Single-family attached and detached homes fell slightly in price.
The slow start to the year is no surprise for board president Tim Syrianos.
“Prospective home buyers are still coming to terms with the psychological impact of the Fair Housing Plan, and some have also had to re-evaluate their plans due to the new OFSI-mandated mortgage stress test guidelines and generally higher borrowing costs,” said Syrianos.
The latest blow to Toronto housing comes from the federal regulator, Office of the Superintendent of Financial Institutions (OSFI), requiring borrowers to qualify for uninsured mortgages at a rate 2 percent higher than the contract rate.
The new rule “creates a borrowing power reduction for everybody in Canada to the tune of about 20 percent,” said Paul Taylor, president and CEO of Mortgage Professionals Canada, in a phone interview a month ago.
“Expect stronger price growth to continue in the comparatively more affordable townhouse and condominium apartment segments,” said Jason Mercer, the board’s director of market analysis, about the upcoming spring and summer months.
The average sales price for February in the GTA was $767,818—down 12.4 percent year-over-year. But early 2017 saw sharp rises in Toronto housing prices, leading to the province’s Fair Housing Plan, which included a 15 percent foreign buyer’s tax. The board’s press release notes the February average sales price is still 12 percent higher than from two years ago, which implies an increase well above inflation.
Follow Rahul on Twitter @RV_ETBiz