Ephraim Vecina
Mortgage Broker News
With new federal rules setting tighter requirements set for borrowers, Canadian banks will be closely monitoring movement in the national markets, starting with updated data to be released today by the Canadian Real Estate Association (CREA).
The Bank of America adjusted its initial Canadian real estate growth predictions of 1.6 per cent down to 1.4 per cent during this quarter and 1.5 per cent in the next.
“The new rules will likely slow down the housing market, which could weigh on growth,” Bank of America economist Emanuella Enenajor told the Financial Post.
Despite the slight downgrade, however, Enenajor stated that the Bank of America is “in the camp that the moves won’t trigger a severe downturn in housing but rather a temporary period of slowing activity.”
Meanwhile, Conference Board of Canada chief economist Craig Alexander said that spending on household times like furniture and appliances might taper down, as the new federal rules will require a significant number of families to pay more for their home purchases.
“Consumer spending growth is going to continue to be a solid contributor to Canada, it’s just not going to be capable of providing strong economic growth,” Alexander stated.
Under the stricter regulations, households might lose as much as 20 per cent of their purchasing power. For instance, a family earning $100,000 would be approved to buy a $490,000 home—a far lower value than the $580,000 home they could have procured prior to the new rules.
RBC Capital Markets agreed with the forecasts of a slight slowdown, predicting that housing and consumer spending will together account for 1.1 per cent growth next year. This is in contrast to the 1.7 per cent average over the past 24 months.
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