I’m sure by now, anyone who has been following the real estate market has heard of the new OFSI B-20 rules. If not, you can go back to the insight article that I had written about two weeks ago and get caught up on the changes – it’s definitely worth a read. This certainly had an interesting effect since it injected a second wind into the Fall market.
Stress test, here we go again – There were essentially 3 major rule changes to the OFSI B-20 rules, but the major one was the stress test on all conventional mortgages; this landed on all of the headlines. I’ve heard different things from different trusted mortgage advisors about how it’s being implemented and how some people think it’s not as bad as it sounds, but that is not what I want to talk about in this week’s insight article. What I do want to highlight here is that there is a scramble going on right now to buy properties because of these new rules.
The mad year-end scramble – The portrayal of the stress test was that it reduced everyone’s buying power by 20% and this is a contributing factor to why the market was extra active in October in the “sub-one million dollar” property category. You can check out this month’s market watch for more details on that but October was definitely the strongest month we’ve seen since March.
With less than 2 months to close (not buy) on your property before the new rule changes come into effect on January 1st, 2018, the scramble continues. People are afraid that they will be forever left out of the market if they don’t buy now. The group of Canadians feeling this the most in Toronto will be those with an income between $50,000-$75,000. This group of people will basically be priced out of even buying a 1-bedroom condo in the suburbs, after the changes come into effect. It’s quite unfortunate. On the flip side though, if you’re an investor, it’d be pretty reassuring to have a tenant who makes $75,000 live in your 1-bedroom condo (that income profile makes for a great tenant).
Everybody else below that income level was likely priced out of the market a while ago. On the other hand, everybody above that level needs to come up with more down payment to buy the same house after the stress test rules come into play.
Time to reconsider – So if you’re looking to buy something and have been waiting because of this “so-called” proverbial correction or crash to reach the bottom, you may want to use your remaining 7 weeks to start looking before the stress test kicks in. If you’re thinking about selling, I think you’ll be pleasantly surprised with the number of buyers in the market right now. Either way, give me a call and we can chat about your situation.
Could there be more changes in the future? Who knows. What I am pretty sure of though is that the Canadian government can make more changes to the mortgage lending practices and intervene with the real estate market in this manner than they can with just changing interest rates. So be prepared for future mortgage rules changes. We shall see what our mortgage landscape looks like in the months, and years, to come.
Until next time – Happy Real Estate-ing,