Sales Boosted By The Upcoming Mortgage Rules Change

Photo by Denis Jacquerye
Photo by Denis Jacquerye

January resale numbers in Canada were highest in the last nine months, CREA reports. Toronto recorded the second highest activity, with Vancouver claiming the first place and Victoria earning the bronze.

The increase reached 4.5% nationally in January (Vancouver 14.2%, Toronto 4.9% and Greater Victoria 4.7%) — not surprising, if you take upcoming new mortgage rules into consideration. Tighter rules, which should prevent a US-style housing bubble in Canada, are about to take effect in the middle of March.

After last year's change of lending standards regarding variable-rate loans (borrowers now have to meet the same standards as if they were applying for a 5-year fixed-rate mortgage), the upcoming change is supposed to release the pent-up steam from the real estate market. According to Flaherty's proposal, the government cuts the maximum amortization period down to 30 years. Moreover, a mortgage may now cover only 85% of a property's value.

The market reacted by shifting demand to the beginning of 2011, especially in the key markets. The industry group said that seasonally adjusted sales totalled 39,481 homes in January — up from 37,773 the previous month but down 6.4 per cent from 42,169 a year earlier.

The national average sales price was $343,675 during the month, fed mainly by rising luxury real estate sales.

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