What are these changes all about? Well, the real estate market has been hot. Everyone knows that. The government is concerned that a major correction in the real estate market, if one does occur, will have negative consequences for the entire economy. To prevent a major correction from happening, the government has implemented a few changes to the mortgage rules in an attempt to cool the real estate market in a subtle and soft manner. Simply put, these changes limit the amount that can be borrowed and require mortgages to be repaid more quickly.

Will these changes achieve their goal of calming the market? Should you be concerned about the value of your property because buyers will have less to spend? Should you rush to put your home on the market as soon as possible? Let’s find out!

Firstly, to determine if these changes will affect the market, we need to know which market it is that the government is trying to calm down. The Canadian real estate market is comprised of many vastly different markets. Is the government targetting the condo market, the new home market or the resale market? Is it in Saskatchewan, Nova Scotia or Ontario? Is it the first time buyer market, the move up buyer market or the empty nester market? Get the picture? These changes might affect some markets, but not others.  Secondly, not all buyers are in the same financial situation. Many buyers won’t even be affected by these changes at all because they have ample down payments, are not borrowing to their maximum limits and have plans to repay their loans quickly.

So back to our original question – will theses changes affect the market? I don’t know anyone with a crystal ball, but my guess is that these changes won’t directly affect the market in central Toronto that much. Most of the buyers with whom we work (and we assume this applies to most buyers in the central core) aren’t over leveraged. It’s unlikely they’ll alter their plans because their mortgage repayment schedules are now based on a 25 year amortization schedule instead of a 30 year amortization schedule as a result of the mortgage changes. However, it’s always important to remember that perception can become reality. The concern expressed by the government might just cause some people to act more cautiously and, as a result, the market might soften a little.

As things stand now, though, there is still much more demand for homes in central Toronto than supply so the market should remain healthy. It will likely slow down for the summer, as it always does, so this will not come as a surprise. If you hear about prices falling in July and August, take this with a grain of salt. It’s to be expected and not likely the beginning of a major correction. Barring unforeseen circumstances, the market should remain strong, slow down a bit in the summer and pick right up again in September.