You know we’ve hit the ceiling when one of Canada’s leading real estate companies becomes pessimistic on home value appreciation. Phil Soper, president and CEO of Royal LePage Real Estate Services is concerned over the recent mortgage rule changes. “The most recent set of mortgage changes, the fourth in four years, is also the most aggressive. The cumulative impact of these new regulations has created a significantly higher hurdle for young buyers seeking their first home and comes at a time when the market was slowing on its own accord. The timing of this intervention was unfortunate,” Mr. Soper declared.
“We have had three years of solid house price appreciation in almost all regions of the country,” stated Mr. Soper. “Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely. Some regions have reached or perhaps even exceeded the current upper level of price resistance as buyers have embraced an era of historically low mortgage rates.”
It’s the era of low mortgage rates that’s largely behind the government’s stricter mortgage rules. Due to international inter-dependencies the Bank of Canada finds itself unable to increase mortgage rates to moderate housing appreciation. Tighter mortgage rules is the closest substitute they have. At this point nobody is questioning the government’s intervention to cool the market, but a vast majority fear that they have done too much too quickly and will cause the very hard landing they set-out to prevent.