You don’t have to teach a UBC real estate course in Vancouver to know that the local housing market is volatile – but it certainly helps. Even as we’ve been helping new generations of real estate agents to prepare to enter the industry, we’ve also been following the regulatory ups and downs.
Home sales continue to be depressed, and January 2019 had the worst numbers since 2015. Many are thinking the so-called “stress test” is to blame, by preventing qualified buyers from getting homes. Is it time to rethink – or eliminate – the stress test?
How the Stress Test Is Affecting BC Real Estate Markets
So, in 2017, many in the public and in government believed there was a problem with the BC real estate market. According to them, too many foreign buyers were purchasing too much property, and banks were too free about giving out loans, leading to inflated prices and everyday people being frozen out of the housing market. So, they set about implementing a series of new regulations intended to deliberately depress the real estate market.
One of the most controversial of these regulations is the “stress test.” Simply put, banks cannot simply evaluate a potential buyer’s income, versus their predicted payments, to evaluate suitability for a mortgage. Instead, the bank must include some “what if” scenarios and require the buyer to demonstrate that they could keep making payments even if, for example, their interest rates went up.
Many in the industry believe this is overreaching.
Further, the change in regulations did their job in 2018. Sales were significantly lowered, almost overnight, by nearly 15%. That should have been enough to satisfy the critics, but instead, the various regulations remain in place. This has resulted in a housing market that continues to stagnate.
Worse, it means that we’re seeing more and more qualified buyers being denied the loans needed to purchase homes. How does that make sense, when those pushing for these regulations claimed they wanted more everyday people buying homes? Those everyday people are the ones being denied!
Clearly, it’s time to roll back the stress test, or at least reduce its severity.
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Despite the downturn, it’s still a great time to become a real estate agent – and we can help you do it FAST! Contact us to learn more about our unique courses.