Although the housing market in greater Victoria has cooled, “the sky is not falling” according to Carol Crabb, President of the Victoria Real Estate Board.
“It means that the first time home buyers and those with less than 20 per cent down for their home purchase may be impacted,” she said. “Still, it doesn’t mean that the bottom has fallen out of the market or that people should forget about ever buying a home.”
The slight decline of the market has come, at least in part, from changes in government lending regulations, and while some of that impact may have had the “cooling effect” that the government desired, for some it means only that home ownership needs to be re-evaluated for the time being.
In light of a superheated real estate market in Toronto and Vancouver, the adjustments to the rules for government-backed insured mortgages were made to discourage “unwise borrowing.” In Canada, mortgage loan insurance is mandatory when anyone wants to buy a house with a down payment of less than 20 per cent of the purchase price. The Canadian Mortgage Housing Corporation (CHMC), which provides mortgage loan insurance through the lenders, allows for a home purchase with a minimum down payment of five per cent but the changes in regulations now limit loans to a maximum amortization of 25 years, down from 30. This is the third reduction in amortization periods since 2008 when the maximum repayment period was set at 40 years.
As well, the most that Canadians can now borrow for a mortgage has dropped from 85 per cent of the home’s value to 80 per cent.
In Victoria the changes seem to have resulted in fewer properties being sold. For example, in October of this year there were 373 sales from the Multiple Listing Service, down from 483 in the same month last year.
“I’m always cautious about reading too much into the numbers,” Crabb said. “Sales and prices can vary considerably on a region to region basis.”
Crabb stressed that, for those who can afford it, this may be a good time to get into the housing market. “You have to look at it as a long term investment. The chief economist for the BCRA has predicted a levelling off of price and a slight bounce back of up to five per cent on home values in the next year, but again that varies from one area to the next. In some areas, the price hasn’t dropped at all.”
She went on to say that while “home flippers,” those who purchase homes and resell after minor renovations, will probably not find their efforts worthwhile. “If you’re investing on the longterm, though, you should know that there has never been a 10-year period during which house values haven’t risen in Victoria.”
She acknowledged that first time home owners may have to lower their sights a bit as a result of the new regulations, but stated that people are now looking at homes where they may have to “roll up their sleeves a little.”
More information on the Victoria real estate scene can be found at vreb.org.