While Canada’s tumultuous real estate market is never a snooze, 2016 ushered in considerable change for buyers and sellers. A number of new policy changes, taxes, and regulations that altered affordability and expectations came into play this year—from government attempts to cool housing demand to a crackdown on foreign investors, here are the year’s top real estate headlines.
A “dangerous combination”: In its first report of the year, the Canada Mortgage and Housing Corporation (CMHC) set a dire tone, warning housing markets—and especially Toronto and Vancouver—are at risk for overheating, price acceleration, and overvaluation.
Hiking the minimum: In an attempt to discourage overly leveraged buyers, the government ups the required minimum home purchase down payment for the second time since 2012. As of Feb. 15, buyers must now pay a minimum of 5% on their home purchase, and 10% on the portion exceeding $500,000. The move forces more buyers to save longer for their down payments, and improves their share of equity in higher-priced homes.
Investigating out-of-country purchases: The newly-elected Liberal government announces in its first budget the allocation of $500,000 to investigate the extent of foreign real estate investment in Canada—a hot topic as out-of-country speculation is suspected to be driving real estate prices out of reach for local buyers.
Duking it out over data: In Canada, it’s illegal to publicly share data on past sold homes and real estate agent commissions—a practice that the Competition Bureau of Canada deems uncompetitive. In an unprecedented move, the bureau challenges the Toronto Real Estate Board in Tribunal Court, which rules such data must be shared with buyers, sellers, and online real estate brokerages.
A not-so-rosy outlook: It has been a tough year for the Canadian economy, from the floundering loonie to devastating wildfires in Alberta. As a result, the Bank of Canada takes a dovish tone on monetary policy, leading analysts to believe interest rates will stay low for the long term.
A proposal to tax empty homes: In efforts to improve the city’s severely limited rental market, Vancouver Mayor Gregor Robertson suggests a tax on homes standing empty as a result of real estate investment—a growing issue as a city-commissioned study finds 10,800 homes are not fully occupied.
TREB appeals the tribunal: The Toronto Real Estate Board isn’t taking the Tribunal Court’s April ruling lying down, and appeals the decision, arguing sharing sold data violates the privacy of seller clients and poses a security risk.
A warning for lenders: The Office of the Superintendent of Financial Institutions (OSFI) casts scrutiny on lenders, warning them to be more stringent when qualifying borrowers for mortgages, and to tighten their mortgage insurance underwriting practices.
A tax on foreign buyers: The British Columbia government stuns the market, introducing a 15% tax for foreign buyers purchasing real estate in Metro Vancouver. The controversial tax draws both cheers from affordable housing advocates and criticism for its hasty implementation. Home sales immediately plunge upwards of 20% in the city.
Lower rates are the new reality: A lower cost of borrowing becomes a global phenomenon and Canada is no exception, says Bank of Canada Governor Stephen Poloz, who urges savers to adjust their earning expectations.
A whole new level of stress: In one of the most drastic moves to date, the federal government implements a mortgage “stress test” for high-ratio borrowers. Those paying less than 20% down on their home purchases must now quality at the Bank of Canada’s benchmark rate of 4.64%—nearly double than some of the contract rates available on the market.
A red warning: The CMHC issues a “red” grade for the national housing market for the first time, signaling troublesome signs of overvaluation across the country.
Funding rules hit banks in the money maker: New rules affecting how banks insure and sell off their mortgage portfolios take effect, forcing them to endure higher costs to fund mortgages. The changes will result in rate hikes and product discontinuations for consumers.
An LTT break for first-time buyers: In what seems like the first positive piece of news for buyers, the Ontario government announces it will double the rebate first-time homebuyers receive on the land transfer taxes to $4,000.
A tax take-backsies: Don’t get too excited about that LTT tax break if you’re a Toronto buyer. City council considers hiking the municipal LTT (the city is the only place where LTT is charged on both municipal and provincial levels) in order to pad the budget.
Back in court: TREB and the Competition Bureau officially head back to court for a final appeal on the Tribunal Court’s decision.
U.S. Fed hikes rates: The U.S. Federal Reserve (the American counterpart to the Bank of Canada) hikes its trend setting interest rate for the first time in a year, as economic conditions and inflation are poised to rise. While this doesn’t mean Canadian rates will rise, a U.S. hike could mean a softer loonie and higher goods and services prices for consumers.