Quick recap: New Canadian mortgage regulations will now require a minimum down payment of 10% for properties priced over $500,000 (but under $1,000,000). The new regulations apply to all Canadian mortgages insured by the government. See full article here: link to the article.
The new down payment rules have gotten a lot of people talking. Many experts believe that these changes will have a significant effect on the real estate markets all around Canada.
I am here to offer my opinion on the subject. Keep in mind, it’s my personal opinion based on my experience and should be viewed as such. I am an expert Metro Vancouver REALTOR®, and can only comment on the local market.
I don’t think that new mortgage regulations will have any significant effect on the Greater Vancouver real estate market.
It is true that a lot of Vancouver properties are priced over $500,000. It is also true that more properties will be reaching that price mark in the near future. In my estimate 90% of all one bedroom condos in downtown Vancouver will cost over $500,000 within the next 5 years.
So why do I say that this rules change will have no significant effect on the local real estate market? In my experience most people buying properties over $500,000 have at least 20-25% down payments. Let me explain…
- Usually, the buyers of five hundred thousand dollar properties are upsizing from smaller cheaper condos or townhouses. They have gained some equity in their starter home and are ready to move into something larger and more expensive. More often than not, “upsizers” have enough equity in their home for at least 15-20% down payment for the new house.
- Most first time home buyers will not qualify for a $475,000 mortgage with a 5% down payment. The first time buyers who buy condos or houses over $500,000 have their families help with a portion or the entire amount of a down payment. Most of the time these down payments are well over 10% mark (closer to 20-25%).
- International buyers and new-comers to Canada will rarely qualify for a mortgage in Canada. And if they do, it’s usually for a special “new-comers to Canada” program. Most of these programs require a minimum of 35% down payment.
- Of course there are exceptions. Some people will be effected by the change. Young professionals trying to buy their first house or a condo. Families who want to get their starter home. And migrants from other Canadian provinces starting their lives in Vancouver.
From my experience the percentage of the Vancouver buyers that will be effected by this change is very small. This small percentage will not have a substantial impact on the overall Vancouver real estate market.
In my opinion, there will be no real estate crash and no major changes to the market activity in Vancouver. Business as usual! The best advice I can give to someone who is looking to buy their first home or a condo – start saving your money for a down payment today and buy it as soon as you can. The prices are not likely to go down.
DISCLAIMER: I am not a licensed mortgage broker. This article expresses my personal opinion only! Do your own independent research before making any real estate decisions.