Calgary hit hardest by mortgage rules on homes over $500K: CIBC
Designed to cool hot markets like Toronto and Vancouver, but hit weak ones hardest: CIBC analysis
Calgary's struggling real estate market will be hit hardest by the change to Canada's mortgage rules that boosts the minimum down payment on homes over $500,000.
- Bill Morneau tightens mortgage rules on homes over $500K
- Calgary a buyer's market for at least 6 months: analyst
Almost 10 per cent of new home sales in Calgary and seven per cent in Edmonton will be affected — compared to four per cent nationally, according to a study by CIBC World Markets.
Under the new rules, buyers would need to put down 10 per cent on the portion of any mortgage over $500,000.
The federal government announced the change on Friday, in a move designed to protect homebuyers in hot markets like Vancouver or Toronto.
Hits weaker markets
But economists say the down payment hike will actually hurt weaker markets — especially Calgary.
We considered the fact that the Alberta situation is challenging- Finance Minister Bill Morneau
"The largest impact — close to 10 per cent — will be on Calgary due to its relatively large share of high-ratio mortgages — not exactly a city that needs additional cooling," wrote CIBC deputy chief economist Benjamin Tal.
The Canadian Home Builders' Association also expressed concern over the changes, noting that 86 per cent of new single- family homes in Calgary sold for more than $500,000.
"While most buyers of homes costing $500,000 or more already put 10 per cent or more down, we're concerned when blanket national policies are imposed because of regional housing market issues," said CHBA Alberta chief Jim Rivait.
Ottawa's response
Finance Minister Bill Morneau said the government looked closely at what the changes might mean for the struggling Alberta economy.
"We considered the fact that the Alberta situation is challenging," Morneau said on Friday.
"We want to make sure that we're doing things that don't negatively impact that market, and in fact, that's one of the reasons why we were very careful about exactly what we did and only impacted those homes over $500,000 up to a million," he added.
Homebuyers are currently required to put down a minimum of five per cent to qualify for Canada Mortgage and Housing Corporation insurance — protection that lenders insist on when providing a mortgage worth more than 80 per cent of the home's value.
Starting in February, CMHC will require a 10-per-cent down payment on the portion of any mortgage it insures over $500,000. The five-per-cent rule remains the same for the portion up to $500,000.
Calgary's real estate market has seen a steady decline since the downturn in the Alberta oil industry.
Figures released by Remax on Thursday predicted a four-per-cent drop in house prices in 2016, on the heels of a five- per-cent drop in 2015. The average residential sale price in Calgary in 2015 was $461,700.