9 May 2019

“In case home prices go up sharply, people usually try to buy faster in order to avoid higher prices or to benefit from the following speculation,” – Poloz added. “As a result, the market becomes even more expensive”.

Nevertheless, when homebuyers’ price expectations adjust in hot markets, the demand may disappear at once, just like in case of Toronto and Vancouver.

“The factor triggering this scenario could be anything: from higher rates and stricter rules to new taxes and growing prices”, – he noted.

It’s been 16 months since the stress test was expanded to uninsured mortgages, and we can see certain markets losing the initial effect of it.

According to BMO Senior Economist Robert Kavcic, Toronto housing has finally reached its bottom.

Home sales in Toronto (on a seasonally-adjusted basis) were up by 11%, which is the highest activity since the beginning of 2018.

Partially, the gain was caused by cold winter months, which made many buyers postpone their purchases, Kavcic says.

“However, the market is also stabilizing, and interest rates help with the affordability and psychology issues. Meanwhile, broader supply-demand dynamics in the GTA keeps showing the necessary support”, – he added.