“The decline in last month above and beyond what was observed a year ago is indicative of the fact that the markets are not merely reacting to new regulations, but the markets have embraced a more systematic response that is characterized by fewer transactions and lower prices,” Ryerson University associate professor Murtaza Haider and real estate industry veteran Stephen Moranis wrote in a recent analysis for the Financial Post.
January sales activity shrank by 4% annually, following an already noticeable 2.4% decline during the same month last year.
“The January 2019 statistics offer the first opportunity to compare the annual change in housing market dynamics after the stress test came into effect,” Haider and Moranis stated, adding that “the housing market slowdown is deeper rooted than a direct and immediate reaction to policy interventions.”
More importantly, a possible domino effect stemming from the largest banks’ mortgage operations should not be ignored.
“The weakness in housing markets also affects mortgage lending, a business The Big Five banks continue to dominate in Canada. The continued slowdown in housing sales may have influenced banks’ mortgage portfolios — the first signs of such an effect could soon be visible…”
Taken together, these developments should make the federal government step up and finally “rethink the policy interventions made in the recent past and see if there is any new evidence that warrants a change in policy.”
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