Ottawa’s new rules to help cool Vancouver’s housing market

OTTAWA, ON. (NEWS 1130) – Federal Finance Minister Bill Morneau is increasing the amount home-buyers must put forward as a down payment on houses over $500,000.

It’s a move designed to cool off the booming real estate market in some of Canada’s biggest cities, including Vancouver.

Home-buyers will have to put 10 per cent down on the portion of the price over $500,000. Anything under $500,000 will still only require a five per cent down payment.

“This will impact one per cent or less of the market,” says Morneau.

He adds the new measure is aimed at expensive homes while still encouraging first-time home-buyers to get into the market.

The stiffer down payment requirement is one of three new measures targeting the stability of the housing market.

“Most of our current buyers live and work in the neighbourhood. When they are shifting to a larger home in that price range or a new home, they’ve already got a fair amount of equity. It’ll be for the newer buyers who are coming out to the [Fraser] Valley and maybe don’t have equity in real estate yet,” explains Jorda Maisey with the Fraser Valley Real Estate Board.

“The young professionals that are coming out and looking for good communities and affordability actually do have more than the five per cent down, the ones that we’ve been working with in particular.”

Financial institutions will face new capital requirements to keep pace with the growing risk of the real estate markets they bankroll.

The Canada Mortgage and Housing Corp. will change the fees it charges issuers of mortgage-backed securities. “The government’s role in housing is to set and maintain a framework that is equitable, stable and vulnerable,” explains Morneau.

The Finance Department has tightened mortgage rules on several occasions in recent years along with requiring stricter enforcement and management of loans in an effort to weed out marginal buyers and excessive speculation in the housing market.

One of the changes saw the federal government reduce the maximum amortization period for government-insured mortgages to 25 years from 30 years.

The Bank of Canada has also expressed concerns that too many Canadians risk becoming over-extended, especially once interest rates begin to rise.

The new rules come into place in February of 2016.