On January 1, a new mortgage stress test for uninsured borrowers came into effect. The test is widely expected to limit purchasing power and cool the Canadian housing market.
Economists and industry watchers alike predicted the stress test would limit the number of first-time buyers able to enter the market, bringing sales down for the first quarter of 2018.
But now, a month after the new rules have been introduced, have experts’ predictions come to pass? Read on for three charts that explain the test’s impact on the Canadian housing market so far.
1. Things are starting to get a little more affordable
What’s going on here: The Toronto Real Estate Board’s affordability indicator tracks the average household income of a GTA homeowner against the average property taxes and utilities of the average GTA home.
The takeaway: While the affordability indicator has only been rising ever since 2011, reaching a peak in 2017, it finally took a dip in January, largely as a result of the new stress test.
2. Home sales take a serious plunge
What’s going on here: The TD economics team tracks national home sales since 2014, and forecasts where they’ll head in the next two years.
The takeaway: Sales took a serious dive in the first month of 2018, and the team predicts they’ll stay down for the first two quarters of the year, before slowly rising into 2019.
3. Ontario and BC home sales are going to be hit especially hard
What’s going on here: The TD economics team tracks BC and Ontario home sales against the national average from 2013 to 2017, with a forecast for where things might be headed in the next two years.
The takeaway: While both provinces’ home sales have stayed well above the national average for years, they’re likely to dip significantly in 2018 as the markets adjust to the new mortgage rules. Interestingly, the team predicts that the Ontario market will recover faster than the BC market in 2019.