Toronto Real Estate Prices did not stop determined buyers in January
For many hopeful home buyers, entering the already hot real estate market is going to become even more difficult than before. On Feb. 15th, the federal government’s new rules requiring higher minimum down payments on certain properties will come into effect.
The Toronto real estate market was off to a hot start in 2016, despite January usually being a slow month for the housing sector. Mild temperatures may have boosted sales, allowing buyers and agents to view houses freely without facing typical Canadian winter conditions. The other main factor was probably the upcoming changes for down payments–the new rules likely prompted the spike in bidding wars in the GTA last month, with potential buyers and their agents seizing any opportunities before the change hits. The Federal government’s new rules are targeting markets in the GTA and Vancouver, where the cost of real estate is far higher than anywhere else in Canada.
In the GTA, there have been reports of houses going for over $150,000 of the asking price last month. Announced late last year, the new rule states that the minimum down payment for new insured mortgages will increase from 5 per cent of the house price to 10 per cent. The policy change applies only to homes priced above $500,000—down payments for properties under half a million dollars will remain unchanged.
Because the changes affect more expensive properties that are usually move-ups and not first-time family homes, the majority of buyers are not concerned because they’re required to put a greater down payment on their mortgage regardless. However, first-time buyers who are eyeing houses in the GTA will not get the break that they would have in the past—with the average selling price of a house reaching $609,110 at the end of 2015, even they will be subject to the change.
This leaves the question: Will the new policy actually curb continually climbing home prices? It’s hard to say for certain. If Bank of Canada decides to cut the key lending rate in 2016, lower mortgage rates will definitely drive sales. However, if all goes according to plan, the new policy will act as a safety net, decreasing the odds of a crash or a correction.