A new construction development offers real estate options for sale in the west end of Ottawa on Thursday, Feb. 24, 2011. (Sean Kilpatrick/The Canadian Press)

Real estate board calls on Ottawa to revisit mortgage stress test

Stress tests were introduced in 2018 to cool real estate markets such as Toronto and Vancouver

Canada’s largest real estate board is calling on Ottawa to revisit whether a stricter mortgage stress test introduced last year is still needed, arguing that the policy has negatively impacted the economy and Toronto’s once red-hot housing market.

“While we saw buyers return to the market in the second half of 2018, we have to have an honest discussion on whether or not today’s homebuyers are being stress tested against rates that are realistic,” said John DiMichele, chief executive of the Toronto Real Estate Board (TREB) in a statement Wednesday.

“Home sales in the GTA, and Canada more broadly, play a huge role in economic growth, job creation and government revenues every year. Looking through this lens, policymakers need to be aware of unintended consequences the stress test could have on the housing market and broader economy.”

Stress tests were introduced in 2018 to cool real estate markets such as Toronto and Vancouver, and have limited the ability for some to qualify for mortgages.

TREB, which represents more than 52,000 real estate agents across the region, says potential homebuyers who moved to the sidelines when the mortgage stress test came into effect will likely re-evaluate their financial qualifications and try to enter the market this year.

It notes that the stress test, which is mandated through the Office of the Superintendent of Financial Institutions (OFSI) has resulted in homebuyers having to qualify for monthly mortgage payments nearly $700 more than what they would actually pay.

“In order to account for the higher qualification standard, intending home buyers have adjusted their preferences, including the type of home they intend on purchasing,” said the report, resulting in the increased popularity of condos and townhouses over detached homes.

READ MORE: Mortgage stress test losing impact on B.C. housing sales

READ MORE: B.C. home sales drop 25% in 2018

Despite these challenges, the board forecasts in its annual outlook that it expects to see a ”moderate improvement” in sales and selling price this year in Toronto’s real estate market but says it doesn’t anticipate to hit the record levels seen in previous years

The board says increased buying intentions will be helped by population growth, low unemployment rates and lower fixed-rate mortgage rates this year.

The outlook forecasts that 83,000 sales will be reported through the board’s Multiple Listing Service (MLS) system in 2019, up 7.2 per cent from 77,375 sales recorded in 2018.

TREB expects the average selling price for the year in Toronto and the Greater Toronto Area will increase to $820,000 — close to the peak reached in 2017 — and up from an average of $787,195 in 2018.

READ MORE: Young professionals leaving Vancouver over high cost of housing

Much of that price growth will be led by the hot condominium market as homebuyers look for more affordable housing options, while the board anticipates the price growth for detached properties to be below the average growth rate for the total market.

Meanwhile, the board expects new listings will remain flat this year after the figure pulled back in 2018 to sit between 155,000 and 156,000.

The report also cautions that the rental market in Toronto and the surrounding area will remain “tight” this year.

“The supply of rental units could continue to be problematic in 2019,” it warned.

The board also reported Wednesday that home sales in Toronto and the surrounding area saw a small uptick in January, a sign that the real estate market in Canada’s largest city remains stable.

In a separate report, TREB says there were 4,009 home sales recorded in January, up 0.6 per cent compared with January 2018. On a seasonally adjusted basis, sales were up by 3.4 per cent versus December 2018.

The board says the average selling price for all property types was $748,328 last month, an increase of 1.7 per cent from the same month a year ago. TREB reports that the more affordable condo segment led the price growth, up by 7.9 per cent in January.

Semi-detached and townhouse properties also saw increases, while the price of detached homes fell by 2.8 per cent in January year-over-year.

The board says the total number of new listings were up, climbing 10.5 per cent to 9,456 listings last month.

Linda Nguyen, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Town selling the airport to Ponoka Flying Club

Agreement is for 25 years with option to buy back

RCMP on hunt for man who has skipped court

Public urged to call 911 if they spot him

Update: Local bull riders help Canada to fourth at PBR Global Cup

Lambert, Hansen manage to earn two of Canadian team’s good rides

Ponoka County wants more information prior to approving permit

Council not satisfied, wants better details about work site and other issues

Blair says RCMP have met Wet’suwet’en conditions, so barricades should come down

The Wet’suwet’en’s hereditary chiefs oppose the Coastal GasLink project

Federal minister pledges to meet Wet’suwet’en chiefs in B.C. over natural gas pipeline

The Wet’suwet’en hereditary chiefs say they are visiting Mohawk territory

Pipeline dispute: Tories put no-confidence motion on House of Commons agenda

Conservatives say they have no confidence in the Trudeau government to end the rail blockades

Blockade on CN rail line in Edmonton removed, injunction granted

The blockade consisted of wooden pallets on the tracks and signs that say ‘No Consent’

Canadians aboard coronavirus-ridden cruise ship to return home tonight

Among the infected are 47 Canadians who will have to remain in Japan for treatment

Carbon risk for Alberta’s public pension manager questioned

AIMCo says nearly $115 billion invested in carbon-intensive industries is on par with other funds

Worker, shocked at future Amazon warehouse in Nisku, has died: family

Colton Quast, 25, was taken to hospital and put in a medically induced coma

Blockade supporting Wet’suwet’en hereditary chiefs on rail line in Edmonton

‘Cuzzins for Wet’suwet’en’ post pics of wooden crates on line, signs saying ‘No Pipelines on Stolen Land’

Higher costs should kill Trans Mountain pipeline, federal opposition says

Most recent total was $12.6 billion, much higher than a previous $7.4-billion estimate

Most Read