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.

Just Posted

Up to 70 mm of rain expected to fall across the Fraser Valley

Environment Canada issued a weather warning for the region Thursday

BC Ferries to pilot selling beer and wine on select routes

Drinks from select B.C. breweries and VQA wineries to be sold on Swartz Bay to Tsawwassen route

Deroche Elementary students release 40,000 salmon fry

Fish were placed in the stream running through the school’s property, on its way to the Fraser River

Mission Fire Rescue receives funds to increase awareness, benefits of sprinklers

Firefighters will show a side-by-side fire and sprinkler-burn demonstration

Mission Friendship Centre hosting Health Fair

Free event has service groups on hand to meet with public

UPDATE: Four victims identified in deadly Penticton shooting spree

John Brittain, 68, faces three counts of first-degree murder and one count of second-degree murder

Elizabeth May’s B.C. wedding will be a ‘low carbon affair’ on Earth Day

Green party leader’s wedding party to depart in a cavalcade of electric cars

5 to start your day

Police identify victim in Vancouver shooting, Trans Mountain pipeline decision extended and more

4 victims killed in Penticton shooting spree remembered at vigil

John Brittain, 68, is charged with three counts of first-degree murder and one count of second-degree murder

B.C. awaits Kenney’s ‘turn off taps,’ threat; Quebec rejects Alberta pipelines

B.C. Premier John Horgan said he spoke with Kenney Wednesday and the tone was cordial

Federal government extends deadline to make Trans Mountain decision to June 18

The National Energy Board endorsed an expansion of the Trans Mountain pipeline on Feb. 22

Prince George sweeps to first-ever BC Hockey League crown

Spruce Kings beat Vernon Vipers 3-1 in the Okanagan Wednesday for 13th straight playoff win

Hwang’s first MLS goal lifts Whitecaps to 1-0 win over LAFC

Vancouver picks up first victory of season

Man identified in Vancouver’s fourth homicide of the year

30-year-old man was not known to police

Most Read