Changes to the Stress Test, and Home Prices in Major Canadian Cities Drop

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Every Friday, Wahi brings you the most important real estate stories from the past week.

Fall Economic Statement Takes Aim at Housing 

The federal government’s latest economic statement just dropped, and this mixtape of policies features a few hits for the country’s real estate fans. The fall statement, which was unveiled on Tuesday, includes $1 billion to build 7,000 homes by 2028, and $5 billion in low-cost loans for another 30,000. The new suite of policies also denies income tax dedications for short-term rental hosts, and forces banks to work with mortgage holders struggling with high interest rates. Lenders are now required to offer Canadians at risk of losing their homes longer mortgage amortization periods and must waive certain fees.

The Stress Test Gets Less Stressful

That dark cloud of anxiety hanging over many Canadian homeowner’s head just got a little sunnier thanks to new guidelines introduced in this week’s fall economic statement. In it the Feds clarify that the stress test does not apply to mortgage switches or transfers on uninsured mortgages, as previously assumed. That means that anyone who put down less than 20% when they purchased a home is free to shop around for better rates at (or before) renewal, and no longer need to qualify at the stress test level of either 5.25%, or 2% over their current rate, whichever was greater. 

Inflation is Slowing Down on Most Things That Aren’t Housing

Inflation is on the ropes in Canada, but housing costs continue to put up a fight. According to this week’s data from Statistics Canada, consumer prices are on the decline, falling from a 3.8% annualized increase in September to 3.1% in October. That’s got experts hopeful that interest rates — and with it, mortgage rates — could start to come down early in the New Year. Ironically, however, the biggest challenge in tamping down inflation is rising shelter costs. According to this week’s report the year’s biggest contributor to inflation remains mortgage interest costs, with rent increases also among the top five. 

Children of Homeowners Much More Likely to Become Homeowners Themselves

If you ask most homeowners of the previous generation, they’ll tell you the key to achieving their homeownership dream was hard work, determination, patience, and persistence. According to new research, however, none of that matters as much as the birth lottery. Statistics Canada found that individuals are twice as likely to own a home if their parents did. Those with homeowning parents have a 17.4% chance of owning their own place, compared with just 8% of those who don’t. Furthermore, the children of parents with multiple properties have a 23.8% chance of being homeowners themselves. So much for hard work.

Home Prices are Dropping in Canada’s Biggest Cities

The dream of big city living may have gotten more attainable, at least on paper. According to the Teranet National Bank Composite House Price index — which tracks housing costs in Canada’s 11 biggest cities — prices dropped by 0.4% in October, representing the first decline in five months. The mouthful of an index puts the blame on rising interest rates and increased supply. Toronto saw the biggest dip of 1.6%, followed by a decline of 1.2% in Edmonton, and 1.1% in Vancouver and Ottawa. While prices are down since last month, however, they’re still up 2.8% on the year.  

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