June 17, 2019  
Far less homes were sold last year due to B-20

Initially meant as a strong policy intervention against red-hot home price growth in Canada’s most in-demand markets, B-20 was responsible for around 40,000 fewer transactions across the country (on a year-over-year basis) during Q4 2018, according to Toronto-Dominion economists.

In a client note last week, the bank said that the impact of the stress testing has been far more enduring and extensive than anticipated – echoing recent sentiments by Ontario Real Estate Association CEO Tim Hudak.

Hudak stated that B-20 has had a market impact “beyond what many thought was the worst case,” with resale activity declining by 11% annually in 2018, the first year of the policy’s implementation.

“Not only are many people unable to become home owners at all; others can’t upgrade as their families grow, which in turn means they aren’t selling their starter homes to people trying to buy for the first time,” Hudak wrote in a piece for Financial Post.

TD Bank economists Rishi Sondhi, Ksenia Bushmeneva, and Derek Burleton argued that immediately rescinding B-20 would noticeably increase Canadian home prices by around 6%, which will be on top of the bank’s 4% growth forecast, by the end of next year.

Considering the situation, the federal government should certainly begin looking at a more relaxed approach from here on.

“Right now it’s a one-size-fits all type of policy, and borrowers differ in their ability to service their mortgage, and they’re different in terms of their risks,” Bushmeneva said in an interview with Bloomberg.

canadianrealestatemagazine.ca

 
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