B.C.’s real estate board is joining the chorus of voices across the country urging the federal government to revisit the year-old stress test rule that has been criticized for eroding housing affordability for many.
The B-20 stress test was implemented in January 2018 to help cool down the red-hot housing market in Canada’s major cities. Would-be homebuyers now have to qualify at an interest rate two percentage points above the rate they negotiate with the bank.
The BC Real Estate Association says the test is reducing people’s purchasing power by as much as 20 per cent.
“We would like to see a review and reconsideration of the current mortgage underwriting ‘stress test,’ as well as a return to 30-year amortizations for federally insured mortgages,” chief executive officer Darlene Hyde said in a news release Tuesday.
“These rules must be changed now before B.C. families are left further behind.”
The association has pointed to the stress test as the leading reason behind dipping home sales since last summer. Sales have dropped 45 per cent in Vancouver since 2018, compared to 18 per cent nationally.
The average price of homes in the Lower Mainland nearly doubled, while it remained mostly steady across the province, up just 0.5 per cent to $716,100, in the first quarter of 2019.
Housing analysts predicted in late December that prices in the Lower Mainland will rise by just 0.6 per cent this year, compared to five per cent in 2018. If true, a home will cost an average of $1.3 million by the end of the year.
Hyde said the test is having a negative impact on other facets of the economy, such as retail spending, as home equity declines in line with decreasing benchmark prices.
The Canadian Home Builders’ Association has also said the mortgage rules may force builders to pull back, leading to slower growth of the housing stock and yet another supply crunch and higher prices down the road.