B-20 is a product of its time, and not necessarily the most effective solution to today's housing problems
The B-20 mandated stress test is already outdated considering current market realities, according to a real estate firm head.
In a recent contribution to the Toronto Sun, Baker Real Estate Inc. president/CEO Barbara Lawlor stated that while the regulatory revisions introduced early last year have helped cool down both sales activity and price growth in the hottest markets, it’s nonsensical to apply the stress tests to first-time new-construction condominium buyers, especially in the current economic climate.
“These residences will take anywhere up to five years before occupancy is available. First-time purchasers are typically at the beginning of their careers, and during those years, buyers will earn equity, advance their careers and make more money,” Lawlor wrote.
“It is unfair to test them now for financial situations that are years away. In addition, we want first-time buyers to be able to take advantage of our incredibly low mortgage rates.”
And while ensuring the national financial system’s durability against risks is paramount, it shouldn’t come at the cost of excluding this sector.
“In attempting to protect Canadians from ourselves, the OSFI let the pendulum swing too far,” Lawlor warned.
“Certainly, conservative Canadian financial practices have saved us from the fate of the U.S. in the past. It is time, however, to revisit Rule B-20 and look at it in the context of what is good for Canadians and Canada as a whole. The ideal big picture includes a steady stream of people buying homes and fueling the economy,” the executive argued.
Lawlor added that prospects for new home/condo resale markets this year are positive, which makes updating the mortgage qualification rules even more crucial.
“Economic drivers include ongoing immigration creating demand, unemployment rates that are expected to remain low for some time, as well as affordability on the world stage. Of course, our incredibly low mortgage rates have a lot to do with that, and we want new buyers to get into the market now while they can take advantage of those,” she concluded.