With all of the changes effective June 1, the Canadian housing market might finally see the cool-down buyers have been seeking. Over the past 12 months, the rapid growth of the Canadian housing
Could New Public Policy Help Cool the Housing Market?
Dated: June 3 2021
With all of the changes effective June 1, the Canadian housing market might finally see the cool-down buyers have been seeking. Over the past 12 months, the rapid growth of the Canadian housing market has pushed many first-time buyers out of the market. The affordability crisis has prompted calls for government intervention.
A recent study by Ipsos Reid-TD Bank shows that most young Canadians are prepared to engage in a bidding war for a new home and offer well above the asking price. Almost half of the respondents said they would be willing to pay over the asking price. Another 13 percent said they would be willing to offer $100,000 or more.
In April, Canada's banking watchdog, the Office of the Superintendent of Financial Institutions (OSFI), proposed raising the stress test level for home loan customers to 5.25 percent. This would ensure that borrowers can afford to pay their bills. The steady decline in mortgage rates has allowed more people to take out larger home loans. This has allowed them to gain more housing options and participate in the cutthroat bidding wars.
The current Canadian housing market has the potential to put banks at increased risk, the Office of the Superintendent of Financial Institutions said. The new mortgage qualification rules will affect about 5 million uninsured home loans. They are expected to lower the monthly payment for these borrowers. This is a big change from past mortgage regulations. Overall, the new rules will make qualifying for a mortgage more difficult, possibly shrinking the pool of qualified buyers.
The Bank of Canada (BoC) has suggested another way to slow down the real estate market: ban blind bidding. This procedure would allow only the most qualified individuals to bid on a property. Others believe that higher interest rates would encourage more people to borrow and purchase homes. This strategy would prevent them from being incentivized to take on a bigger loan. BoC Governor Tiff Macklem has not indicated that interest rates will rise but has expressed concerns over the rise in home prices and the level of household debt.
Christopher Alexander and Elton Ash, two RE/MAX real estate industry leaders, are urging the government to carefully consider cooling measures to prevent a possible housing bubble. The federal government's plan to build and repair additional housing units is a step in the right direction, but it's not enough to address the country's housing shortage.
Many areas in Canada are struggling to keep up with the rising cost of living. According to Statistics Canada, the median after-tax income for two households is $63,000. This means that many households cannot afford to purchase a home. No matter what regulations are implemented in the coming weeks and mother, it's becoming more and more difficult for people to buy a home without some help from family members.
Hiring a realtor with experience is crucial to finding a home within your budget that still meets your needs. In this hot market, you need someone you trust to help you navigate all of the possibilities.
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