As of mid-February, Canadian homebuyers in the country’s hottest markets will have to shell out much more on a down payment for their dream home. The new mortgage rules are aimed at cooling the red hot markets in Toronto and Vancouver, where a decrypt house in a popular neighbourhood recently sold for $2.5 million dollars and well above the asking price.
The new mortgage rules that came in effect February 15th require that homebuyers put 10 percent down on homes or properties that cost more than $500,000. Homes costing one million or more still require a minimum 20 percent down payment.
While some have applauded the move, others are critical of the one size fits all solution that it imposes.
“If you lower interest rates, you lower interest rates for all. And that’s not what the country needed,” Phil Soper, President and CEO of Royal LePage, told the Financial Post. “This change … is the first attempt to recognize the fact that some parts of the country are in need of a mild tap on the break, while other parts of the country really need to continue to receive stimulus.”
Through forcing a market cool down in Ontario and British Columbia, the federal government may inadvertently benefit markets in Alberta, which have been struggling amid the weak Loonie and low oil prices. It’s too early to tell whether some of Calgary’s real estate market stagnation will be mitigated by the new rules; however, Calgary developers have already begun looking for new avenues and revenue-generating opportunities.
“Calgary home builders have traditionally responded to market shifts more quickly than in many other major centres in Canada,” said Don Campbell, senior analyst with the Real Estate Investment Network. “This has protected the impact of dramatic oversupply that other cities experience when economies, and thus housing demand, slow.”
Calgary developer and President of Strategic Group, Riaz Mamdani, began shifting his company’s focus from commercial construction to the rental property market when the Alberta economy began to turn a year and a half ago.
“Rental properties was where the growth was occurring, so we shifted our direction and began to invest in rental property construction,” explains Mamdani.
Getting ahead of the curve has benefited Riaz Mamdani and Strategic Group. The Calgary-based development company currently has five rental unit projects underway in southern Alberta and plan to start another four by this summer. “Being able to adjust as the market changed has allowed our company to remain profitable during the province-wide financial pressures,” Riaz Mamdani adds.
The Alberta real estate sector is also seeing increased interest from our neighbours to the south, who are flocking to Alberta’s Rocky Mountain resort towns to buy and rent vacation properties.
“In the mountain town just minutes from Banff, a 1,100-square-foot condo boasting two bedrooms, two baths and beautiful views is listed at $429,000. But when you factor in the exchange, that’s only about US$296,000,” writes Bill Graveland for the Canadian Press.
Whether it’s higher down payment rates in Ontario or increased rental unit builds in Alberta, the Canadian real estate sector is in the midst of a country-wide balancing that will hopefully benefit buyers in the long run.
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