B-20 pulled down national sales
Ephraim Vecina
Canadian Real Estate Wealth
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.
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