As we all know Toronto and Vancouver housing markets have suffered greatly from the foreign buyers’ taxes, but there’s a new report that expects prices to drop again once interest rates rise.
The National Bank of Canada latest observation found out that home affordability deteriorated in the third quarter of this year, nine quarters in a row. There has not been one this long since 1980.
A normal household would usually take up to 58.3 months in order for it to save up for the down payment. Last year, the case was different it only took 47.9 months. The report stated that the worse slump happened in Toronto, Victoria and Vancouver.
In Toronto, the reason for the drop in affordability was because of rising interest rates. The bank also increased its lending rates twice this summer, it went from 0.5 to 1 per cent.
“In Vancouver, affordability fell by the most since 1994 as potential homebuyers were also hit by a surge in home prices,” this was written by economists Kyle Dahm and Mathieu Arseneau.
Due to the high house prices, this has left Canadians vulnerable to rising interest rates like never before, they stated.
“Twenty years ago, (one percentage point) increase in mortgage rates would have caused deterioration of our national affordability measure by 3.5 percentage points. Today, a similar increase has an impact 60 per cent larger given much higher home prices.”
The two cities of Toronto and Vancouver are the most vulnerable to rising interest rates they said. For now though, both housing markets are facing a little setback caused by the foreign buyers taxes which was introduced by the provincial government.
There was a report released recently by The Toronto Real Estate Board (TREB) saying that sales have gone up from September to October, that is showing that prices have gone down in the market. The sales are still down by 19 per cent from the same last year, also the amount of new listings is at its highest from the last five years.
The average selling prices have gone up to about 2.3 per cent from last year, now you can sell a house of any type for $780,104 which is still down to 15 per cent. Around April this year, it peaked to $920,791.
However the board is still remaining positive about the condition. “While the number of transactions was still down relative to last year’s record pace, it certainly does not appear that sales momentum is picking up,” the TREB President said in a presentation.