It seems that all housing market industry participants are finally in agreement. Mortgage rules don’t need to be any tougher. After the most recent mortgage rule changes, Jim Flaherty admitted that he couldn’t see making them any tighter. Adrienne Warren, Scotiabank’s senior economist, recently pronounced “Canada’s national housing market is shifting towards a more sustainable path”, and earlier this week, Standard and Poor’s reaffirmed Canada’s triple A rating.
Sales activity is down across the country and in some regions values have dropped. Although this doesn’t sound like good news, it’s reduced many concerns about bursting bubbles and a housing market collapse. This new found confidence in Canadian real estate will provide peace of mind to many homeowners concerned about the value of their greatest asset. This confidence will help sustain spending and investment into the broader economy.
The question remains though, does the needs of the many outweigh the sacrifice of the few? There’s no doubt that tighter mortgage rules are responsible for the more sustainable path. These rules have had very little impact on the majority of Canadians, but they’ve had a dramatic impact on an unlucky few. First time homebuyers on the affordability fence have been knocked out of the market by higher mortgage payments. In many cases they could have owned for the same monthly cost as renting, but are now resigned to remain renters.
The other segment of unlucky few are self-employed borrowers. Many self-employed Canadians cannot prove their income in the same way as salaried individuals. Unable to satisfy these stricter income guidelines these individuals will be kept out of the real estate market, and for many of them who already own their own homes they will be unable to refinance or move their mortgage to another home.
We can all feel good about the path of the Canadian real estate market, but let’s not forget those that are left behind.