House prices fall, residents struggle with mortgage rules: study
CTV British Columbia
Published Tuesday, October 23, 2012 10:23AM PDT
Last Updated Tuesday, October 23, 2012 9:09PM PDT
While homeowners across Canada believe residential prices will climb two per cent over the next year, 27 per cent of Vancouver residents expect prices to decrease, according to a new BMO Housing Confidence Report released Tuesday.
“Given that Vancouver is one of the priciest markets in the world, it's not surprising that many people expect some correction," said Sal Guatieri, senior economist, BMO Capital Markets, adding that prices in Vancouver are poised to decline moderately.
Findings of the inaugural report shows 53 per cent of Vancouverites plan to buy property in the next five years, but the effects of the new federal mortgage regulations will be felt.
Among other changes, Ottawa reduced the maximum amortization terms for government insured mortgages to 25 years from 30. Because of the rules, that came into effect in July, one in five Canadians said they are less likely to buy a new home in the next five years and 30 percent of those planning to buy before 2017 said they are likely to spend less, according to the report.
The study also reveals most Canadian homeowners have made spending cuts over the past year, just to pay their mortgages, and even a minor interest rate boost would cause them significant strain.
The survey says 72 per cent of homeowners would be impacted by a mild interest bump, while 16 per cent say a 10 per cent jump would have the potential to force them out of their homes.
The Bank of Canada left its key interest rate unchanged Tuesday.
With files from the Canadian Press