The stress test on insured mortgages allows the government to achieve the effect of higher interest rates without actually raising them.

It basically screwed over first time buyers in Vancouver and Toronto whose buying power was diminished at the stroke of a pen. It's easy to say that people should wait, but a lot of people have legitimate reasons for wanting to buy sooner rather than later.

Although if you can't afford a 2% hike in interest rates should you have bought the place to begin with?

yes because still cheaper than renting

Interest rates don't go up 2% overnight. The majority of first time buyers get 5-year fixed rate mortgages anyway, so the impact of an interest rate increase is only felt when their mortgage comes up for renewal. And 5 years is a long time for people to increase their incomes or learn how to live with less.

Prices for starter homes, such as strata condos and townhouses, have not come down. But, people who want to buy in because they are sick of renting or want the stability of ownership because they are starting families, have had their ability to qualify for mortgages reduced. It's not about whether they can afford to stomach a 2% increase 2 years from now, it's about what they can afford to buy today or 2 months from now.

From a macroeconomic perspective, it's probably a good thing that these stress tests have been introduced. But for the first time homeowner who has 10-15% down and is ready to buy, its more challenging today.

Starter homes haven't come down yet, who knows if they will or will not in the future. Condos in Vancouver might not come down but it could have a bigger impact in the burbs. Plus, if this stress test affects that many first time buyers, couldn't that alone force starter home prices to drop?

People can't pay what they aren't approved for.

Not really a fair statement to make.

This guy's numbers are a bit off because it was made last year and using Toronto's numbers, but it gives you a good basic view into the buying vs renting argument.

could just drive people further east

Developers are insanely quick to pull the trigger on raising prices, but almost never accept a decrease as far as i've seen, even with sagging inventory or low interest

Yeah but used condos and townhouses could still drop in price, and I've already seen discounts up to 20k on some new build townhouses in Langley the last couple months

Condos prices have held steady cause that's the only thing millennials can afford while presale prices keep going up.

Avenue One by Concord on 2nd avenue in Olympic village just released their prices.
2 beds 950sq ft starting 1.38 million with no parking. That's nearing $1400 sq ft.

God help us all.

Real estate agents caught breaking the rules on Marketplace's hidden camera - Business - CBC News

*GASP*

A lot new condos now don't offer parking to low floors, 1 bedroom, or studio units. I think each city have a limit on how many parking spots an apartment can have. So developers usually don't offer parking to units that don't make much money.

Here is a tip never every buy an apartment without an parking spot. Even if you don't drive you can still rent the parking spot out and when you sell it, your unit will be worth a lot more and sell faster.

Here's a scenario that I whipped up to show the impact of the stress test:

Family income is 100K
50K down payment
Property taxes of 180 per month
Strata fees are 250 per month

Under old rules with an interest rate of 2.2% the max house price would be 594K.

Under the new rules with an interest rate of 4.64%, the max house price is now 458K.

So, the market essentially has to drop 20% for this hypothetical young professional couple to buy. Is a 20% drop possible? Maybe. But that would be a pretty significant drop all things considered.

Yeah I can definitely see why it sucks, I myself will be a first time homebuyer eventually lol. Although given your example, wouldn't that 594k place be about $2350 just on the mortgage alone? That's pretty steep for a 100k household is it not?

I think the stress test is great. So many young couples believe that they can max out to whatever the bank is willing to give them. Which puts them in a precarious situation where not only are they at the mercy of potential interest rate hikes, but they also likely are not saving enough on the side.

I haven't done the stress test but too late now I already commuted to buy in Feb lol, will take possession next year in the summer hopefully. While we went pretty high with our budget after crunching numbers I felt we could still afford it without being house poor so we'll see. Still not happy about the property transfer tax we just missed the new threshold by a bit and instead of getting it waived now have to save up $15k in cash just to pay it.

It amazes me that banks actually allow people to get approved for such ridiculous amounts compared to what they earn. I would never want to use the max of what I was approved for, good luck ever having a rainy day fund when everything you earn goes into paying bills.

2 schools of thought. The first is that you buy to the max of your affordability, scale down your lifestyle, work hard to increase your income, and hope that your property increases over the time you own it. This was the philosophy for most of our parents when they bought houses with 20% interest rates.

The second is you buy enough house without compromising your lifestyle. You may end up not with as much property appreciation in the end because you bought a lower type of property to begin with (1 bedroom condo vs 2, 3-bedroom townhouse vs detached). This was our decision.

My sense is that the first time home buyer wants it all - a modern home in prime neighbourhoods with upgrades without compromising in other areas of their lives, such as travel, commute times, new cars, clothes, etc.

It's all about risk vs reward for the bank, but even where there is risk that you default, as long as you have made enough of a downpayment, they know they can make their money back by foreclosing on your house and selling it.

So if you are making 10k/year and stupid enough to put 300k down on a million dollar house, some banks or shady lenders may very well approve you for a 700k mortgage, then as soon as you obviously can't make the payments, they foreclose sell the house for whatever and pocket a large part of your downpayment.

Sounds like the new way of thinking is just pile on the debt and let Jesus take the wheel.

YOLO and the Instagram generation.

Might be buying a 2 bedroom to add to my investments...

New build or not, prices are dropping in the olympic village. If the market remains soft, these buyers may be underwater when these units complete at these prices...

Pricing for Avenue One is ridiculous. I purchased in Arc and prices were around $1050 sq ft ft so it's beyond me how they can justify close to $1400 sq ft.

Well, the Olympic Village is an area for people who want to be close to downtown, but with none of the noise and other issues that come with downtown living. Before the Olympics, people were laughing about south False Creek. Now, it's probably one of the most desirable neighborhoods in all of Vancouver. I can understand the appeal and if I had the means, I'd love to live down there in one of those ground level townhouses. Would never live an apartment with elevators again though.

Avenue One has unobstructed views of the mountains and the water and is next to a city park. It's sitting on prime land, so I can see why it would cost more. Plus, I believe that building height is restricted in South False Creek, so Concord has to make up for that by charging more per square foot.

Three harbour green PH listed at 58 mill:

3101 277 THURLOW STREET - For Sale | Blu Realty - Unique Property Marketing - Vancouver Real Estate

Looks like buddys from Dragons Den/Boston pizza?

unless the prestige of 3HG is just that crazy, the northwest PH of Trump has to go for at least this if not more, it's view is wayyyyy crazier and as big if not bigger