No new regulations, drastic home price increases in 2018 – analysis

by Ephraim Vecina05 Jan 2018
By all indications, 2017 has proven to be a tumultuous period in the mortgage and real estate spheres, but a markets observer argued that this year will offer a measure of respite to these beleaguered sectors as well as to a consumer base labouring under an ever-increasing debt burden.

In a recent analysis, James Laird – co-founder of RateHub Inc. and president of CanWise Financial – predicted that no new federal-level mortgage regulation will be introduced in 2018.

“Over the past several years there has been a steady flow of new regulation imposed on the mortgage industry. Maximum amortizations have been reduced, minimum down payments have increased and stress tests have been added. Some are worried that current regulation has gone too far, which is why the federal regulators will take a break in 2018,” Laird stated.

He also projected that variable and fixed rates will experience a modest rise, at best. “The Bank of Canada will increase the key overnight night rate by 0.5% causing all variable rates to rise. This will put upward pressure on bond yields which will cause fixed rates to rise as well.”

“In 2017 the Bank of Canada moved the key overnight rate twice, but it still remains historically low. The Canadian economy is doing well, so the Bank of Canada will choose a modest strategy of two rate increases, with a few months in between each move,” Laird added.

Read more: New rules will further stoke hunger for unregulated lending options

In addition, home prices are expected to remain relatively steady, neither increasing nor decreasing drastically.

“The macroeconomic factors that have been driving price appreciation will persist in 2018. Net new immigration, scarcity of housing supply, economic growth and first time home buyers entering the market will put upward pressure on housing prices,” Laird explained. “However, the new stress test that comes into place on January 1, 2018, combined with rising interest rates, and recently introduced foreign buyers taxes will act as an effective counter-balance, causing no net-change.”

Unfortunately, the number of Canadians that will be forced to borrow from unregulated lenders will only increase this year, Laird warned.

“All of the recently added regulation combined with the [OSFI stress test] will cause more Canadians to borrow from unregulated lenders at higher rates. Canadians who need to refinance and no longer qualify will be forced this way, while some who are looking to purchase and no longer qualify with a regulated lender will choose to go this way.”


  • by Philip Bautista 1/6/2018 2:09:24 PM

    I think the rate of increase and decrease of prices will depend on the locations and how much rate of increase is. History will tell on properties that double their price in 2 or 3 years will go down. Rate of increase of more than 25% in one year is not healthy , of course with some exceptions. Just like what happened in 1985 when prices double in 1988, cause of big numbers of immigrants who has money invested a lot in Real Estate. The same thing happened in the US in 2005 to 2008-2009 when prices doubled. This increase does not really reflect the actual picture of the economy. It is always foreign influence this thins happen. The locals will always pay the price. It is so unfortunate that Officials always have self interest not to disclose the real picture. Finally Globe and Mail published an investigative report that primary reason why there is a big rate of increase in housing prices are foreign buyers. I do not disregard that Canada is one of the best places to live and immigration will always be high. The government should also build affordable housing. But it is unfortunate to hear people in the industry telling Market is healthy and tell them to buy now even the problem is to qualify. It is only Canada that does not tax foreigners for investing in Real Estate. Unfortunately it is always the local people that suffer. Just like punishing locals by paying double Land Transfer Tax if your second time owner.

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