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Low-Entry Housing to be Affected by Mortgage Rules

5 July 2012

When Finance Minister Jim Flaherty announced that he would be making changes to home refinancing and amortization periods on government-backed mortgages, he cited Toronto’s housing market as one of his main concerns. But while the new rules will most certainly dampen the market there, what exactly are they going to do to Calgary mortgages?

To know the answer to that, you must first understand how the housing and mortgage market works in Calgary.

The housing market in this city is divided up into three different categories – entry level, where homes are $300,000 or under; move up level, where homes cost between $450,000 and $700,000; and the high-end level, that sees homes that are priced over $700,000. And while the two top categories, those considered to be higher end, aren’t likely to feel much effect from the recent mortgage rule changes, it’s the low-entry level homeowners and homebuyers that will feel it the most.

When the new rules were announced, the City of Calgary’s Corporate Economics department released a statement saying, “The Calgary housing market has two active sectors, entry level and move-up level. Low priced entry level housing will be affected most by this mortgage rule change. We anticipate a price drop in the below $300,000 market of about 8 per cent as a result of this mortgage rule change. Houses valued at or above $450,000 should experience little downward pressure while houses priced over $700,000 will experience none.”

But those at the Calgary Real Estate Board aren’t concerned. Ann-Marie Lurie, senior economist with the CREB says that while some will be priced out of the market, the cooling effect will only return Calgary’s housing and mortgage to normal levels.

Ms. Lurie said, “You would expect to see some of that sales demand cool. We’ve had really strong sales demand this year. So even if it’s cooling, it’s not going to be a total reversal of what we’ve seen. It will impact demand as you’re pricing some people out of the market.”

She continued on to say, “Another thing you’ll see is what people can afford will also change. We can expect this to have some sort of dampening impact on price growth as well. The single-family market has been fairly tight and prices have actually been increasing a little higher than expectations. This will actually bring it more in line for what we did expect originally for the year.”

So even if entry-level Calgary homebuyers are going to be affected by the change, it won’t be so much that the housing market here will suffer too greatly from it.

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