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Winnipeg Free Press - PRINT EDITION

Housing market cooling

Analysts blame new mortgage rules

By: Julian Beltrame

Posted: 09/25/2012 1:00 AM | Comments: 0

OTTAWA -- Canada's housing market appears to be cooling across the board in the face of tighter mortgage rules that affect many first-time buyers of modest means, a new analysis from the Conference Board shows.

The think-tank's snapshot of resales in August shows a widespread decline in sales of existing homes, with 21 of 28 metropolitan markets registering a drop from July, and 16 of the markets showing a fall-off of five per cent or more.

As well, listings fell in 17 of the 28 markets, an indication owners were reluctant to place their homes for sale due to the soft conditions.

In Winnipeg, sales in August were down about four per cent from a year earlier -- 1,241 versus 1,290, WinnipegRealtors reported this month. But they were still running two per cent ahead of last year's pace after the first eight months of the year -- 9,387 versus 9,196.

The Conference Board said house prices in the city are expected to climb by five to 6.9 per cent over the short term.

But despite rising prices, it said balanced-market conditions still prevail in Winnipeg, with a sales-to-new-listing ratio of 0.727. The balanced market range for Winnipeg is 0.422 to 0.811.

Senior economist Robin Wiebe of the Conference Board said there was evidence of cooling in some markets -- particularly Vancouver and Victoria -- before the new mortgage rules went into effect July 9. But the new data show the slowdown has spread to most markets and from coast to coast.

"When you see sales down in three-quarters of the market, that means it's pretty widespread," he said. "It's knocked previously high-flying markets like Regina and Saskatoon down a peg. Vancouver had been showing signs of cooling; now it's spread out into the Fraser Valley."

When Finance Minister Jim Flaherty announced in July the maximum amortization period for mortgages would be reduced to 25 years from 30 years, the government estimated it would increase monthly payments by $184 on a $350,000 mortgage.

It was the fourth time Flaherty tightened mortgage requirements in four years, but the measure was regarded as the one likely to be the most effective.

While sales and prices were temporarily sidetracked by the previous announcements only to recover a few months later, this might "be the one that broke the camel's back," Wiebe said.

Scotiabank economist Adrienne Warren said the cumulative impact of Flaherty's tightening measures is definitely showing up in the numbers, but other factors are playing a role, including buyer fatigue and high household debt, as well as concerns about the economy.

Economists have generally been forecasting a correction of between 10 and 25 per cent in prices over the next two or three years. Vancouver, which had for years been Canada's hottest market, has seen a tumble of about 30 per cent in resale homes.

-- The Canadian Press, with files from staff

Republished from the Winnipeg Free Press print edition September 25, 2012 B5

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