The first full month since Ottawa tightened mortgage rules is in the books. While it’s still early on, the move appears to be having an effect. But is it the desired effect? The August numbers show a 6% drop in sales nationally. There is also anecdotal evidence that applications for insured mortgages are down. One real estate economist says that the broad-based nature of the decline indicates first time buyers are staying out of the market. This of course, has trickle-down implications for the rest of the market.
There is also a train of thought that, while recognizing the slowdown, the run-up to the tighter rules saw buyers rushing to beat the deadline, and “stole” business from the future. Proponents of this theory expect market declines will be more moderate over the coming months.
This plays into the “soft-landing” camp, which has received another vote of support from one of Canada’s big bankers. Richard Waugh, of Scotiabank says Canada has a real estate bubble, but it will deflate rather than burst. He projects a 10% decline in sales and a 10% drop in prices.