Now in full swing, B-20 could have a domino effect in Vancouver and put even more downward pressure on the city’s vacancy rate.
Michael Lloyd, team lead at DLC
Canadian Mortgage Experts, says the mortgage stress test will prevent prospective investors who are looking to buy rental properties from entering the market—particularly problematic, considering the vacancy rate in Vancouver is below 1%.
“These changes are making it harder and harder for people to buy rental properties to rent out,” said Lloyd. “It’s probably taking out 20-25% of people who would have bought a rental property, but now can’t, or won’t under this guideline. They certainly won’t do it in Vancouver; they’ll probably look to other cities to invest in where the numbers make more sense, and that means we have even less rental stock here in the Lower Mainland.”
Jason Turcotte, Vice President of Development at Cressey Development Group, doubts the investor market will be noticeably impacted by B-20 the way Lloyd thinks it will be, however, he agrees that a pattern of migration into surrounding municipalities, like Surrey, will occur.
“The people who need the most help in terms of mortgage, they’ll be hit the hardest,” he said. “The people stretching to get into the bottom end of the marketplace will be pushed out. They may need to look at a suburb or two out of Vancouver, and it will further complicate the demand for sub-markets.”
Lloyd doesn’t think the robustness of the Vancouver market will be compromised by B-20. For starters, he says that about 20% of the purchasers will be affected, “but those are the people least likely to buy right now, so I don’t think it will impact the market as much as people think it will.”
There are also borrowing alternatives, although they may not be optimal, but Lloyd doesn’t believe people will be permanently shut out of the city’s housing market.
“B.C. credit unions are pretty strong compared to the national credit unions, and because they don’t have to follow OSFI rules that may nullify some of B-20 impact in Vancouver,” said Lloyd. “I still think it’s a big thing and it’s putting people on the sidelines and they’ll have to wait longer to participate in the market. It doesn’t mean the whole market will come to screeching halt and that prices will drop.”
Added Turcotte, “The demand is still there, but it’s just going to get moved around.”
Government will harm economy and housing sector, claims broker
Government lying about reason for rule change implementation, claims industry veteran