None of us have a crystal ball which will tell us what the markets will do, but if history is any indication of where we are headed, than we don’t have to look very far back. Just the sheer amount of changes to the industry with little or no warning, in the last 10 months, is enough to know that things are going to get a lot worse before they are going to get better, if at all! Most of this blog is from the headlines of the last 10 days!
6 factors that may make it harder for Vancouverites to buy a home
1) Increasing Property Tax Rates: These tax rates, affect everyone, even if you are not yet a home owner. At the heels of announcing a Vacant home tax, the City of Vancouver is now proposing a 3.4% increase in property taxes. If the cost of holding the properties will increase, these will affect your debt ratios when submitting a mortgage application.
2) Tighter Mortgage Rule Constraints: in light of the recent introduction of the stress test which affected 20 - 24% of affordability for buyers, the changes have made it more difficult for the average consumer to purchase a home. It was only in February of this year, when the minimum 10% downpayment sent many buyers scrambling to get anything, just so they could take advantage of the 5%, cause they knew it was ‘now or never’
3) Higher Interest Rates: The same rules announced in October 2016, gave advantage to the big 5 banks over the mono-line lenders, because it made the market less competitive for them. Since then we have already seen TD and RBC raise interest rates in the past few weeks.
4) Possible Increase in Insurance Premiums: From the tone of recent private speech given by CHMC’s CEO Evan Siddall, there maybe an introduction of stricter capital requirements as early as next year that may cause insurers to hike premiums.*
5) City of Toronto announced an Increase in Land Transfer Tax from 1% to 1.5%. I commended the Ontario Government in my last blog for their effort in providing rebates rather than taxing, but seems this week they have changed their tune in the name of ‘harmonization’ **
Will Vancouver follow suit as it looks for more ways to “cool the market’, before the next election?
6) Cost of Living: ICBC announced last week foreseeable rate increases; The big 5 banks starting to increase rates. RBC said it’s due to the ’cost of doing business’; tax collection efforts are amped up at a accelerated pace all in the name of helping the ‘first time buyers’ - Not one effort is going towards putting more money in your pocket.
Each province watching the other to see what the rest of the country is doing. It’s a bit like the blind leading the blind.
I don’t mean to paint a gloomy picture, but if I was thinking of buying, I can imagine it’s only gonna get tougher. So, my message is simple, get in touch with a mortgage broker, get your applications in and start figuring out what needs to happen, before more policy changes your outcome for you.
Any Questions or Comments, please feel free to email me: shali@shalitark.com
* as reported by Tasmin McMohan The Globe and Mail Nov 18, 2016
** as reported h Tess Kalinowski The Star Nov 27, 2016
photo cred: Luis Lierena