Stress Test Impact On BC Home Sales

July 16, 2019

Was the B20 Mortgage Stress Test the main cause of home sales across Canada plummeting to start 2018? Were there other factors?  The implementation of new federal and provincial housing policies designed to temper the hot BC housing market could have been a cause? Higher interest rates? The BC provincial speculation tax, the expansion of the foreign buyers’ tax or a combination of all of these factors? The BC Real Estate Association blames a combination of factors, but feels the stress test played a large part.

Sales across the country dipped in 2018, partially due to interest rates and affordability, the BCREA said.

However, they also state that the B20 stress test also played a part. The federal mortgage guideline is meant to ensure those buying a home would still be able to make payments if the interest rate rose or their income fell preventing a market collapse like was experienced in the United States. 

The stress test was intended to be applied to insured mortgages and on buyers making down payments of less than 20 per cent. The standard has since been extended and applied to uninsured mortgages and those with higher down payments as well. 

The move was deemed reactionary and put into place to correct the market explosion in the larger city centres and while it has succeeded by bringing housing activity down to a sustainable level in markets including Vancouver’s, critics have argued the rules are too rigid especially for buyers in less impacted markets.

BCREA data suggested B-20 stress test had a more profound impact in Canada’s most expensive markets – Metro Vancouver and Toronto. While the dip in sales is not due to the test alone, the association estimated it accounted for an average of nearly one-third of the total downturn in sales, and cost the province more than $500 million in spin-off economic activity.

To read the full report from the BC Real Estate Association click here to go to their website.