Mortgage rules roil stock market

Mortgage rules roil stock market

The aftershocks of the country’s new mortgage rules may extend well beyond the housing market and to Bay Street, according to market analysts reviewing the performance of the S&P/TSX.

"The S&P/TSX may decline as much as 10 percent over the next year should government measures such as tighter mortgage restrictions spur declines in housing prices," Sadiq Adatia, chief investment officer at Sun Life Global Investments in Toronto, told reporters Monday.

The warning comes on the heels of news that the exchange's SPTSX compositie index dropped 0.5 per cent this year through Aug. 10. That's quite removed from the 8.1 per cent gain for the MSCI World Index. The gap between the two is, in fact, the biggest since1998.

The performance in Canadian shares this year has trailed behind most other markets in developed countries.

Forecasts for a stagnant Canadian economy in 2013 and the new, tighter mortgage rules are now raising concerns that that poor performance will only worsen.

Ironically, real estate may ultimately benefit from any slump in the capital markets as Canadians turn to property to make up for an shortfall in their stock market portfolios.

It means that commercial brokers and those working with investor clients may begin to see an uptick in business heading into 2013, according to some industry analysts.