A previous report has stated that Canadian real estate franchiser Royal LePage believes that prices will continue to soar throughout 2016 in the two large real estate markets in Canada. According the firm's Alan Stewart, market indicators are suggesting a price increase but he heeds that it may be too early to tell. He said, "The indicators now are for more price increases so the longer you wait, the more it will cost you until there's a correction of some kind."
The new "policy ceiling" by a new Federal mortgage rule just might be the "correction" that will control Toronto's. According to Globe and Mail, the average housing prices, setting new record highs, in the Greater Toronto Area (GTA) rose to almost 10 percent last year to $622,217 with more properties being resold. But with the "policy ceiling, the Toronto Real Estate Board believes that the price increase would slacken to between 5 per cent and 7 per cent this 2016.
The board then pointed out to Ottawa's recent move to increase down payment requirements for insured mortgages on luxurious properties. In a previous report, the federal government will be raising the minimum down payment for more-expensive homes in Canada effective next month. This change will hopefully control price growth in a sense that borrows who will struggle to pay the minimum down payment will be obliged to put plans to purchase more-expensive properties on hold as lenders tight mortgage policies.
According to the board, "In effect, there will be a 'policy ceiling' on price growth." The board also adds that whether mortgage rates rise or fall this 2016 could define the line between another record-breaking year with an overheated Toronto real estate market or more subdued sales.
On the other hand, the Bank of Canada is expected to cut rates this year, with this the mortgage rates would still be low and thus offsets the effect of the new "policy ceiling."
