Record House Prices in Victoria - New Mortgage Rules Come into Effect
On July 1st the Canada Mortgage and Housing Corporation (CMHC) new mortgage rules came into effect. These changes are meant to reduce the risk of taxpayers footing the bill for bad loans, as well as protecting homebuyers who would be likely to take on too much risk in an economic downturn.
These rules include:
Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to standard requirements of 35/42;
Establish a minimum credit score of 680 for at least one borrower;
Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes.
These rules are not meant to make it easier to buy a house or make it more affordable, but rather to mitigate the risks of mortgages.
With the long-term effects of Covid-19 unknown, the level of risk that would be acceptable at other times is too much, especially when CMHC anticipates a 9% to 18% decrease in house prices over the next 12 months.
How this will fully affect Victoria is still to be seen, but so far it is looking positive and that there will be an increase in housing prices, compared to the rest of the country.
In June there was an unusually high number of luxury home sales in Greater Victoria. This meant that June pushed the average selling price for a single-family home to more than $1 million for the first time (although the median price for a single-family house was lower, at $865,750). A total of 23 single-family homes sold for more than $2 million each, and of those, six went for more than $3 million.
These numbers are possibly as a result of all the uncertainty and lack of action on the property market in May, or anticipation of these new CMHC rules resulted in people wanting to get their purchases completed before they came into place.
Victoria is a beautiful place in which to buy a home, and the Covid-19 crisis has made many people from the Mainland and beyond realize that moving to Victoria would be in their best interest. With an influx of new buyers coming into the area, house prices are unlikely to decrease as dramatically as CMHC anticipates, and the increase in housing prices may continue.
Whichever way the market goes, we can help ensure you get your dream home, so contact us today to get the process started.