Sales have rebounded and then some in housing markets across Canada this summer, defying even the best case recovery scenarios laid out by commentators in the earlier days of the pandemic.
Alongside worries over the economic impact on would-be homebuyers linked directly to COVID-19 shutdowns, some market experts had expressed concern about new mortgage borrowing rules announced by the Canada Mortgage and Housing Corporation (CMHC) in early June.
Housing Market News Alerts
Sign up now for news alerts on the Canadian housing market
The rules, which came into effect on July 1, tightened mortgage lending standards at the national level by introducing higher minimum credit scores and new restrictions around “non-traditional” downpayment sources. Industry groups, including the Canadian Home Builders Association, immediately criticized the announcement, characterizing the CMHC’s move as limiting opportunities for new buyers to enter the market.
Writing in early June, Central 1 Credit Union Economist Edgard Navarrete said the rules would “undoubtedly slow demand for housing in an already weakened market.”
But with two months now behind us with the new rules in effect, has any evidence emerged that they’re actually impacting housing demand?
Not really, according to Scotiabank Economists Marc Desormeaux and Alena Bystrova.
“The effects of more stringent mortgage borrowing conditions introduced by the CMHC on July 1st may eventually dampen mortgage demand, though there is little evidence of that to date,” they wrote in a housing research note last month in which they described home sales as “in the stratosphere.”
While August home sales data from the Canadian Real Estate Association has yet to be released, results from regional boards indicate that the rules didn’t appear to have an impact on home buyer activity in the final month of the summer either.
Toronto posted the best-ever home sales total of any August in history. Home sales in Vancouver rose 36.6 percent last month and were nearly 20 percent above the 10-year average for the month. Other major markets saw noteworthy sales increases too, with Montreal up 39 percent and Ottawa up 17 percent.
These sturdy results bode well for housing market activity heading into the fall, but a great deal of uncertainty remains about the outlook for the final months of 2020.
“Like everything else in our lives these days, the uncertainty COVID-19 presents makes it challenging to predict what will happen this fall,” said Real Estate Board of Greater Vancouver Chair Colette Gerber.