Home sales were down in January around Greater Victoria, but experts differ on the root cause of the slowdown. Don Descoteau/Victoria News

HOMEFINDER: Soft sales due more to inventory than mortgage rates: experts

Effect of new ‘mortgage stress test’ still unclear

The extension of a mortgage stress test to all homebuyers, including those with larger down payments, has had an effect on the level of sales in Greater Victoria say local finance and real estate professionals.

The new rules created by the Office of the Superintendent of Financial Institutions went into effect Jan. 1 and set a new minimum qualifying rate or “stress test” for uninsured mortgages. The new borrowing rate must be the greater of the five-year benchmark rate published by the Bank of Canada, or the contractual mortgage rate plus two per cent.

“In real terms those rules meant that those people trying to qualify for a mortgage were suddenly qualifying for 18 per cent less that they would have before January,” explained Andy Vickers, a mortgage professional with The Mortgage Group in Victoria.

“When you combine that financial pressure with the fact that inventories are still down in Victoria, it isn’t surprising that sales have declined.”

The latest Victoria Real Estate Board figures show 9.8-per-cent fewer sales were transacted in January than for the same period last year, when 478 properties were sold.

The sales of condominiums in particular fell 30.6 per cent from last year, when 118 were sold. That compares with the single family homes sales drop of four per cent from last January.

“We expected January to be a bit slower after the increase in activity we saw in November and December,” said board president, Kyle Kerr. “Which was likely due in part to buyers entering the market early to avoid the new mortgage stress test.”

The full effect of the new rules has yet to be seen, he added, “as many people attained a 90- to 120-day pre-approval before [Jan. 1]. We won’t know how much that stress test will affect the spring market until we see the numbers, and spring is also the time when sales traditionally pick up.”

But Tara Hearn, a real estate professional with Century 21, Queenswood Realty Ltd. in Victoria, said she hasn’t personally worked with anyone whose plans to enter the market were derailed by the new qualification rules.

“I think it has less to do with the rates than it has with the lack of inventory in Victoria,” she said. “If you look at the sales of condos, for example, there just is very little out there on the market. A lot of new stuff is coming on, but it’s not ready yet and there’s definitely a lot more needed.”

Hearn explained that while there are homes still available at the high end of the market, the number of homes for sale in the middle price points are at a premium.

At the same time, she acknowledged, it’s likely the new mortgage qualification rates will have some effect. “Victoria is an expensive market and (with the new limits on mortgage qualifications) people are going to have to adjust their expectations.”

editor@vicnews.com

Just Posted

Moose Hide campaign takes message to Canadian schools

Campaign launches new K-12 education platform

Lost wedding ring found on Valentine’s Day

Dan Milbrath’s ring is back where it belongs

Runners invited to get set for the 40th annual Goodlife Marathon

More than 9,000 runners expected to pack Victoria streets in October

Victoria installation for the blind causes problems for those with mobility issues

The truncated domes installed at Blanshard and Fort streets aren’t helpful for everyone

Fire destroys South Island Concrete building in Sooke

No injuries resulted from large structure fire

Trudeau’s principal secretary, Gerald Butts, resigns amid SNC-Lavalin furor

Butts categorically denies the accusation that he or anyone else in the PMO improperly pressured former attorney general Jody Wilson-Raybould

Poverty coalition has high hopes for B.C. poverty reduction strategy

Funding allocation expected to be released with 2019 budget

‘How did we get here?’: B.C. mom of transplant recipient worries about measles outbreaks

Addison, 7, cannot get a live vaccine because she has a heart transplant

Steelhead LNG stops work on Kwispaa LNG project near Bamfield

Huu-ay-aht First Nations ‘deeply disappointed; Steelhead says funding is the problem

NDP Leader Jagmeet Singh calls for public inquiry over SNC-Lavalin questions

Vancouver member of Parliament Jody Wilson-Raybould resigned from cabinet last week

Canadian airlines waiting for guidance from Ottawa over X gender option

Major U.S. airlines said they will change their process so passengers can identify themselves along non-binary lines

‘Violent’ B.C. man wanted on Canada-wide warrant

Prince George man with ties to Vernon sought by police

Homicide police investigate assault turned deadly in Surrey

60-year-old man died at hospital after assault

Deported B.C. man who came to Canada as a baby granted chance at return

Len Van Heest was deported to the Netherlands in 2017

Most Read