OSFI’s new mortgage stress test, which went into effect at the start of the year, will likely push many Metro Vancouver entry-level homebuyers deeper into the suburbs. However, the test won’t curb an “insatiable” demand for residential real estate, according to Jason Turcotte, vice-president of development at Cressey Development Group.
Speaking to Real Estate News Exchange, Turcotte called the new mortgage stress test “a good thing, for sure,” as it would likely shift a lot of lower-rung home-buying to outlying suburbs, rather than eliminating it.
“You’re not necessarily deterring [people] from buying, you’re changing what they can buy. What you’re going to see is just increased pressure on the more affordable product. I think what it will mean is you’re just shifting that demand around a little bit.”
Turcotte said there was a lesson amid all the recent government intervention in the Vancouver-area housing market.
“I’ve learned how incredibly insatiable the demand for real estate here is,” he said. “In spite all of these demand-side measures, the demand continues to be exceptionally strong.”
He added that submarkets like Burnaby, Richmond, and Coquitlam could see more activity from entry-level homebuyers who will now be dealing with smaller loans.
OSFI’s new guidelines suggested that the government is expecting more interest rate hikes this year.
“Obviously, being in the business of both buying and selling real estate, low interest rates are certainly a good thing for our industry. But macro-economically, increasing interest rates are a sign of an improving economy and growth in the economy and that’s obviously good.”
The homebuilding industry relies on buyers who aren’t over-leveraged, and the new mortgage stress test will help in that regard.
“If you were going to buy in Vancouver, now you’ll look to Burnaby or Coquitlam, and if you were going to buy in Burnaby, you may look a little further east, so it’s going to put a lot of stress on markets that are lower price points,” he said. “I hope that we’re prepared to deal with the shift of demand out that way.”