October 27, 2016

New Mortgage Rules & Their Impact on Multifamily Properties

New mortgage rules – on top of a continuing decline in home affordability – may impact the rental market throughout 2017.

The average 2016 housing price in Canada is $474,590, up from $433,401 the year before—a year-over-year increase of 9.5%. As housing prices also continue to climb, especially in places like Toronto and Vancouver, homeownership is being pushed out of reach for many Millennials and Post-Millennial hopefuls.

In an interview with BNN, Shaun Hildbrand, senior vice-president of the Toronto real estate research firm Urbanation suggests that Toronto’s rental market could feel the pressure as first time buyers will have a difficult time climbing onto the property ladder.


New Regulations

And new federal mortgage rules aren’t likely to improve the situation anytime soon. Earlier this month, Finance Minister Bill Morneau announced changes to Canada’s mortgage rules that are intended to stabilize Canada’s housing markets and to slow overspending encouraged by low lending rates in recent years.

The first rule, which came into effect on October 17, 2016, will reduce the purchasing power of first-time homebuyers, thereby limiting risk to households and lenders. It involves a mandatory stress test for all insured mortgage applications to make sure borrowers can still pay off their loans if interest rates rise of their personal finances change. The second rule, which takes effect on November 30, will standardize eligibility requirements for low- and high-ratio insured mortgages.

Some fear that the new rules are overly cautious and will put into motion a downward spiral that will negatively impact prospective homebuyers alike – not to mention the overall economy. With fewer people approved for loans, the market will see a reduction in housing starts and, subsequently, fewer housing completions.


So How Will This Play Out in the Rental Market?

Higher home prices and lower availability, coupled with more stringent loan requirements, mean that fewer renters will be able to secure home ownership.

Economists are predicting that the new rules will push more people to rent.

And, the market is already red-hot. In Vancouver, two bedroom units rose by 4.5% to $2,800, and across the country in Toronto, two bedroom units saw even greater increases as the median price rose 4.8% to $1,760. Other significant markets, like Montreal and Victoria also saw increases.

It may seem like a landlord’s market. But beware: Any tenant isn’t necessarily better than no tenant. In any market, it’s critical that property management firms find ways to attract and retain the most reliable, desirable residents.

To learn more about rental market trends and what you can do to stand out from the competition, sign up for your free account today or give us a call.

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Devika Kabe

Financial/Administrative Assistant, Katalyst Real Estate Corp.

Describe your experience in a few words

Takes off the administrative burden of physically entering leases, very helpful customer service

What do you like the most about the software?

Ability to automatically collect rent monthly through auto-pay, pulls out rent from tenants bank account