Would Change to Mortgage Stress Test Help the Toronto Real Estate Regional Market?
TORONTO, March 02, 2020 (GLOBE NEWSWIRE) — Real Estate Analyst and Vice President of PPS Realty Brokerage, Ali Salarian, noticed that most real estate market analysts and practitioners are skeptical about the new changes to the mortgage stress test.
Without a doubt, the mortgage stress test, which was implemented two years ago, was a game-changer and had an immense impact on the real estate market by resulting in tighter purchase affordability for the buyers in the short run. However, the negative effects hit when the supply of inventories dwindled later in 2019, resulting in a reduction in homeowners willing to sell their properties to move to more expensive properties, especially those above one million marks in the GTA. This made the federal government announce the new change, which would commence by Apr. 6, 2020, and which will make buyers eligible for a mortgage loan. They have to be able to afford payments at a rate of 2% higher than the BoC current average rate, which is only 0.5% lower than the average five-year-rate of 5.19% previously used for stress test rules. Definitely, it’s good news for first-time buyers who may boost their affordability approximately by 5-10%, but the bad news for them is that the market is projected to grow by 10% or more for this year as per TRREB.While the federal government can help on macro-level only, as the real estate micro-markets differ from one province to another according to its economic performance and outcomes, the provincial government can provide tools like lower land transfer tax on properties above one million dollars to supply more inventories for first-time buyers and catch up with the foreseen increase in demand. Furthermore, to stop some controversial behaviors practiced by realtors in the market such as listing properties below market price which causes chaos among buyers who are not allowed to know other bidders’ price at multiple offers presentation situation, and makes them bid unreasonably.Ali Salarian