Photo: James Bombales
The first quarter of 2018 saw a serious drop in national home sales, which has been largely attributed to a new mortgage stress test that came into effect on January 1. Just how much of an effect is the test having on would-be buyers? According to a new survey, quite a bit.
“Canadian homebuyers report being pinched by the stress test,” reads a new report from RE/MAX Ontario-Atlantic Canada, released today. “Almost one in three opted not to purchase altogether.”
That same survey found that four in 10 buyers have had to compromise on their home purchase since the test came into effect.
Housing Market News Alerts
Sign up now for news alerts on the Canadian housing market
“It is expected that government intervention and the stress test will continue to play a pivotal role in purchasing behaviour as we look to the months ahead,” reads the report. “One quarter of buyers compromised on the size of their home, while 18 per cent made concessions on the location of their home.”
Still, it’s not all bad news — 55 per cent of buyers surveyed said they felt they were able to purchase the type of home that suited their family’s needs, up from last year’s 46 per cent.
And the report predicts that sales will start to recover in the second half of 2018, as buyers start to adjust to the effects of the test.
“Despite all of the factors involved, the spring market across most of the country is forecasted to strengthen as we head into the warmer months,” reads the report. “Supply is still low in many markets, and while the prices may not reach the same levels as this time last year, we are expected to see continued healthy price appreciation from the earlier months of this year across many regions in the country.”
That prediction has been echoed by many other industry watchers, including RBC senior economist Robert Hogue, who believes that activity will pick up in the coming months.
“New listings rose in February in both Toronto and Vancouver after declining markedly,” he writes in a recent note. “This could be an early sign of a pick-up in buyer activity in the coming months.”