The association was responding to a report released on Thursday which showed that the propety sales declined by 2.9 percent compared to one year ago, despite there being a slight increase of 0.9 percent compared to February.
CREA President Jason Stephen asserted that the stress test imposed by the government on borrowers is “chilling activity in the housing market” and limiting the ability of many Canadians to buy a home. He went on to say that in order for the housing market to truly recover, the government must find ways to make housing more affordable for prospective buyers.
The Bank of Canada introduced the stress test in an effort to ensure that borrowers can continue to pay their mortgages even if market conditions deteriorate or interest rates rise. The test requires lenders to only lend money to those who can afford payments of at least two percentage points higher than their desired mortgage rate.
Although the stress test has been successful in cooling the housing market, potential buyers feel the effects more acutely. Stephen notes that while the decrease in the number of properties sold is in line with lowered expectations, the problem still persists. He stresses that policy makers must look for a balanced approach between cooling the market and making housing more affordable for first-time buyers, who have been the most affected by the stress test.
CREA also revealed that the national average house price declined by 6.2 percent when compared to one year ago. The real estate association attributed this to continued market uncertainty stemming from the stress test. CREA Chief Economist Gregory Klump also noted that sales in British Columbia have declined due to a “collapse in demand” related to the implementation of the mortgage stress test.
Overall, the CREA report paints a dismal picture for the Canadian housing market in March. Weakening demand for housing has resulted in a decrease in the number of properties sold and a decline in the national average house price. Recent data suggests that the government-mandated stress test has been successful in cooling the market, but it is also limiting the ability of many Canadians to purchase a home. CREA President Jason Stephen has called for policy makers to take an alternate approach which balances cooling the market and making housing more accessible for first-time buyers.
This article was contributed on Oct 29, 2023