2016 was certainly, in my opinion, one of the craziest real estate years I’ve ever witnessed in my 330-yearcareer. Prices have just gone nuts! We’ve got a flood of GTA buyers coming into the area like I’ve never seen before as they can’t afford a house in the city anymore. They’re driving far enough until they can afford one and in many cases, Cambridge/Kitchener/Waterloo happens to be the areas that they are settling in on.
Along with this crazy market, the new mortgage rules kicked in. First and foremost is they’re putting ‘First-time Homebuyers’ or anybody that’s putting less than 20% down on a property in a lower buying power position. They call this the ‘stress test break’. Meaning lenders use what’s known as a Benchmark rate to see if your income qualifies for a certain mortgage amount. Originally people could qualify for the bank’s contract 5-year rate, which is less than the Benchmark rate. The new rate is a much higher rate than before meaning a much lower allowable mortgage amount. The end result is a decrease in mortgage affordability on average of about 25%. Some say this 25% decrease may also have the same effect on the market; a 25% decrease in real estate sales. But the lack of inventory is what is driving the prices and the market. Let’s hope that the market continues to be strong with average price increases. I certainly don’t want to see it going crazy like it has been because it’s getting to the point where it’s almost unaffordable. It makes you almost fear for your kids and your grandkids and what they’re going to be able to buy. So, I imagine these rules are going to put the brakes on growth a little bit. Essentially the first and second quarter of this upcoming year are going to be the ‘tell-all’. 2017 could be an interesting year as some lenders may not survive with many investors backing out of the market. We may see an increase in B-lending or Private lending as well.
Another change is the new land transfer tax rules kicking in as of January 1st. As of this date, first time homebuyers will now be entitled to up to a maximum of a $4000 rebate up from $2000. Anything above $4000 is a cost to the buyer.
There are changes constantly in this marketplace and I am dedicated to updating my knowledge constantly.