The Toronto Real Estate Board is blaming a soft housing market on tighter mortgage lending rules — and wants 30-year amortizations back to fire up sales.
Sales declined 2.5 per cent to 5,025 transactions, while property prices edged down 1.5 per cent to $780,400 this February year over year.
“The OSFI-mandated mortgage stress test has left some buyers on the sidelines who have struggled to qualify for the type of home they want to buy. The stress test should be reviewed and consideration should be given to bringing back 30-year amortizations for federally insured mortgages. There is a federal budget and election on the horizon. It will be interesting to see what policy measures are announced to help with home ownership affordability,” said TREB President Garry Bhaura.
Thirty-year amortizations are currently only available for borrowers who put more than 20 per cent down, or who seek out a non-traditional lender. Before 2011, it was possible to get a mortgage as long as 35 years, even with a smaller down payment. But the former (and late) Finance Minister Jim Flaherty put an end to that, citing concerns about the risk mortgage debt poses to the Canadian economy. Canadians have one of the highest debt to income ratios in the world, at around $1.74. Canadians now owe over $2 trillion, with the majority of that being from mortgages.
Stress Test Blamed for Market Slowdown
The stress test, in place as of January 1 2018, has significantly slowed the rate Canadians are acquiring debt, and in that way, has theoretically reduced the risk to the economy as a whole.
Extending the amortization length would likely allow more first-time buyers to enter the market, because monthly mortgage payments would be lower, but would also increase their interest payments and slow down the rate at which they can build equity.
Either way, the current limits are likely to remain in place through 2019.
Condos Continue to Lead Market Price Growth
The stress test also had the unintended side effect of heating up the condo market. Condos now make up 30.5 per cent of transactions across the GTA, coming second only to single-family homes, which still lead at a 43 per cent share of total sales.
Condo prices are also on the rise. Condos in the 905 rose 3 per cent to $449,000 year over year while condos in the 416 rose 7.5 per cent to $612,500. Overall, condos rose 6 per cent across TREB to $562,000.
Liberty Village condos, the hottest neighbourhood for high-density living, for example, rose 13.5 per cent year over year to $702,000.
That means a condo in Liberty Village is now approaching the price of a detached house in some neighbourhoods in the City of Toronto. Etobicoke homes for sale, for example, can be found for an average of $729,000 near West-Humber Clairville, Rexdale-Kipling and Elms-Old Rexdale.
Want to see all the sales and pricing data in detail for the month of February? Check out the infographic below.