New rules unlikely to harshly affect Metro housing market: economist
Some prospective home buyers could be squeezed out of the Metro Vancouver market by new federal mortgage rules, but only those looking to get in with razor-thin down payments, experts say.
Boosting down payments on certain homes could delay some buyers’ purchases, but it is unlikely to cause a severe downturn in the market, said Cameron Muir, a chief economist at the B.C. Real Estate Association. About 35 per cent of Metro Vancouver home sales are in the $500,000-to-$1-million price range that the federal government targeted with its rule change.
“It is a fairly significant number of homes, but people buying $800,000 homes typically aren’t putting down razor-thin down payments of five per cent and carrying that kind of a mortgage,” Muir said. “First-time buyers tend to buy at the lower end of the market place, so for them it wouldn’t be much of a change.”
Muir characterized the federal move as “longer-term risk mitigation.” When asked if it was a good idea, he said “it’s the least worst measure they could implement right now.”
Tom Davidoff, an associate professor at UBC’s Sauder School of Business, said increasing down payments to qualify for Canada Mortgage and Housing Corp.-insured mortgages was a smart move.
“You’re hedging against the risk of a home price decline, which is sensible for an insurance company,” Davidoff said.
“I don’t know if house prices are going to fall from where they are here — it’s very hard to forecast home prices especially in a place like Vancouver or Toronto, where it’s not so easy to add new supply — but there’s certainly a risk that prices will fall.
“You don’t charge a lot of money for each home insurance policy. If a buyer was to default, that’s CMHC’s problem.”
Davidoff said if five or 10 per cent of people in the market were taking on five per cent equity loans “this could really cool things down.”
But without seeing CMHC’s numbers, “my impression is that’s a smaller part of the market and therefore it’s not likely to have a huge effect,” he said.
Neither Muir nor Davidoff could immediately say how many homes in the region would be affected by the change or where they are primarily located.
To get a rough picture of the impact, The Sun ran through the region’s active MLS listings Friday afternoon.
About one-quarter of Vancouver homes listed on MLS fell within the $500,000-to-$1-million range, including 13 singledetached homes, 15 duplexes, 44 townhouses and 285 condos. About 21 per cent of Burnaby homes on MLS, and 25 per cent of Richmond and North Vancouver homes fell in that price range.
Most homes in those cities in that price range were apartments or townhouses.
Moving further east, the proportion of single-family homes available in that price range increases.
Most of the 39 Port Coquitlam homes listed in that price range were single-detached houses, as were the bulk of the 661 in Surrey, 106 in Langley and 179 in Abbotsford.