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Stress Test and Other Changes on the Real Estate Market

Nov 22, 2016 | Newpathway, Featured, Business

Alexa Kostuk for New Pathway, Toronto.

As the new mortgage rules come into the effect and the United States will soon have a new President, many people are wondering whether these developments will cause some changes regarding buying power and the whole state of the real estate market. How much of a change will all this have on the full-steam-ahead, red-hot Toronto real estate market? Some experts are saying that they are not expecting much of a change; however, some are anticipating a drastic decline in the market.

There are two significant factors that are expected to affect the real estate market. The first are the two new mortgage rules. As of October 17, most mortgage applications will be subject to a “stress test.” This test will evaluate if a home buyer would be able to afford their mortgage if interest rates were to increase. What most people do not know is that the “stress test” has been in place for some mortgages for many years. However, it will now be applied to all insured mortgages when a buyer puts down a downpayment of less than 20% of the home value.

So what does this mean for home buyers in Toronto? New home buyers will be feeling this change the most. The market will most likely experience a slight decline in terms of new home buyer purchases, specifically in the lower priced housing and condo markets. Ultimately, new home buyers may have to adjust their expectations in terms of what they are looking for in a new home. The “stress test” is intended to force people to purchase home they can actually afford.

Secondly, the United States has a president that will most likely not treat Canada kindly with his expected protectionist policies. There is an expectation that our dollar will drop, which could cause interest rate increases. People are wondering, if this will have a detrimental effect on the Toronto real estate market.

In spite of these forecasts most experts still feel that Toronto’s excellent global reputation and strong immigration will continue providing strong demand for the real estate in the GTA. This, coupled with shortage of homes for sale, will likely keep the market vibrant, at least for some time.

Talk to your bank and sales representatives about the best real estate options for you.

Alexa Kostuk, Sales Representative
Dalinda Team, Top 1% Team in Canada*
Royal Lepage

(*based on the number of sales sold by the Dalinda team in 2014 from Royal LePage)

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