Stress test and the supply issue: the Federal Government has to take action.

Tuesday, November 5, 2019 Written by Emmanuelle in General

It has been nearly two years since the federal government’s mortgage stress test was first introduced with the intent to cool the hot Canadian housing market.

Since then, particularly in the Greater Toronto Area (GTA) the market adjusted and potential home buyers looking to purchase a new home have stepped off.

Still the mortgage stress test did nothing to address a housing supply problem.

Unfortunately, it only addressed demand. Home prices stabilized because tens of thousands of young families and newcomers to Canada were locked out of the housing market.

Why do we have a supply issue? The GTA’s population is growing at the rate of 115,000 per year and the inability to build enough new homes fast enough is a problem. We are falling short by about 10,000 units a year.

It is now time for the federal government to update the stress test to better align it with current market conditions.

A good option to help would be reintroducing 30-year amortization periods for first-time buyers.

According to Dave Wilkes, implementing the CHBA (Canadian Home Builder Association) recommendations would return the top 64 per cent most qualified of buyers to the market and would allow 89 per cent of first-time buyers 

Source : Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD)

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