Recent real estate numbers show a stabilizing market in Toronto and Vancouver, but one broker wonders if this recovery can sustain itself in the face of rising rates, and, more especially, OSFI’s tighter guidelines.
“I have said it before many times,” says Ron Butler
, of Verico
Butler Mortgage. “if our business has been so drastically tightened today, imagine what will happen when rates reach the 4.5 per cent average of the last 20 years?”
Butler, who had told MortgageBrokerNews.ca yesterday
that his business has been affected by Finance Minister Jim Flaherty
’s tightening of the amortization regulations a year ago, also points to the OSFI rule changes as having a detrimental impact on the mortgage channel.
“If it were just the rule changes announced a year ago, maybe it would not be so bad,” he says. “But the OSFI rule changes that have really never been made known to the public have had a grinding effect, as they continue to be tightened on what seems like a monthly basis.”
Numbers released recently by the Toronto Real Estate Board show GTA sales dipped less than one per cent last month compared to the previous year, while Vancouver enjoyed the biggest increase since 2011.
Dianne Usher, president of the Toronto Real Estate Board, put a positive spin on the numbers citing a marked reduction in the rate of decline over the previous first quarter.
“The sales picture in the GTA improved markedly in the second quarter of 2013,” says Usher. “While the number of transactions was still down compared to 2012, rates of decline were substantially improved compared to the first quarter.”
Usher pointed to a rise in GTA prices of 4.7 per cent (year-over-year) to an average $531,374, while Vancouver house prices fell 3 per cent.
“As a growing number of homebuyers, many of whom put their purchase on hold due to stricter lending guidelines, now reactivate their search, the expectation is for renewed growth in home sales in the second half of 2013,” she said.
Beyond those simply looking to buy, Butler points to those looking to refinance or otherwise leverage built-up equity in their homes – and the qualifying hoops that they must now jump through.
“Who would have ever thought the day would come that a client with an unused line of credit would need to qualify as if the LOC was at the limit of the highest possible repayment level?” he asks. “If someone had told me that was going to happen a year ago, I may not have believed them.”
release from Scotiabank, using data from real estate boards across Canada, reveal home sales in June of this year are on a par with numbers from the same month in 2012. However, the tighter mortgage rules and underwriting guidelines have had the “cooling effect” intended by Ottawa.
“We estimate that the latest changes introduced last summer, including shortening the maximum amortization period for insured mortgages from 30 years to 25, may have reduced the pool of potential buyers by as much as 10 per cent,” states the release. “Beyond this levels adjustment, however, historically low interest rates, steady job gains and population growth continue to underpin housing demand. Meanwhile, improved selection and stable pricing are likely proving attractive to both first-time and move-up buyers who may have been reluctant to enter the market under tighter sellers’ market conditions.”