After several years of feeling like the rising prices and growth were never going to stop, the market has recently begun to cool down. The falling prices in some areas have many homeowners worried and on their toes, as the high home prices have allowed many Canadians to accumulate a lot of wealth previously. Now that the growth has slowed down and even decreased, homeowners are more cautious on borrowing and spending, which in turn affects the economy short-term. Despite the momentary slow-down, the long-term demand for homes in Toronto seems to be very positive. Let’s take a look at some of the reasons that may be causing the market to cool down.
New Regulations in BC and Ontario
In order to better deal with the affordability issue, the governments of BC and Ontario imposed taxes on foreign buyers in 2016 and 2017. Foreign buyers in the Greater Vancouver area now have to pay an additional 20% tax and in Toronto and the Greater Golden Horseshoe area, they have a 15% tax.
New Bank Lending Rules
Uninsured mortgage borrowers must now be able to afford interest that is 2% above the contracted rate or the five-year benchmark rate published by the Bank of Canada. This means that a lot of people have now been priced out of borrowing mortgage to be able to afford a home.
Higher Interest Rates
The Bank of Canada has confirmed a raised interest rate, increasing it from 0.5% to 1.25%. Commercial banks have also increased their rates by about 0.5%.
The number of sales in Toronto has fallen about 40% between March 2017 and March 2018 and prices are expected to continue slowing down for the time being. Despite all these changes there are still ways to make the best of the current market depending on your unique situation. Always seek out a professional for a private consultation suited to your specific needs and situation to see what the best decision will be in the cooled-down market.
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