Kenney wants mortgage stress test removed for Albertans as house prices sag
A United Conservative Party government would call on Ottawa to eliminate mortgage rules that are making it harder for Albertans to buy homes, UCP Leader Jason Kenney said Wednesday.
Speaking to a crowd of hundreds of realtors at the Calgary Real Estate Board’s annual forecast event, Kenney said the mortgage stress test introduced at the beginning of 2018, which was meant to ensure homebuyers can still afford their mortgages even if interest rates rise substantially, is an “unfair attack on Alberta home ownership.” He said if he becomes premier, he will introduce a motion in the legislature calling for the federal government to remove the rules from the Alberta market and will encourage other provinces to join.
“One of the reasons why homes are less affordable in Alberta today is because of unfair rules imposed by Ottawa to deal with the overheated real estate markets in Toronto and Vancouver,” Kenney told reporters. “We (Alberta) did not have a risk of overheating . . . (Canada Housing and Mortgage Corp.) has taken out a bazooka rather than a fly swatter to deal with this problem.”
Kenney’s remarks came following a pessimistic 2019 housing market forecast from CREB, which is expecting Calgary home prices to fall by an average of 2.3 per cent over the course of the year. The sliding prices expected in 2019 are a continuation of a four-year trend of declining sales activity and rising inventory in the Calgary housing market.
“Some of the factors are really what is going on in the energy sector and how that is affecting confidence,” said Ann-Marie Lurie, CREB’s chief economist. “And, of course, the main factor is really that job market. We continue to struggle with high unemployment rates, we are not expecting to see a lot of job growth, and that is weighing on our housing market as well.”
Lurie declined to comment on Kenney’s proposal regarding the mortgage stress test, but said stricter lending conditions combined with higher interest rates are another factor that weighed on housing demand in 2018.
“There’s no question those more stringent tests have impacted the housing market,” she said.
According to the Canadian Real Estate Association, purchasers who previously qualified for the average detached benchmark home in Calgary would now need to save an additional $76,000 to purchase that same home as a result of the new mortgage rules.
Cliff Stevenson, a Calgary realtor who serves as the CREA’s regional director for Alberta, said the increasing unaffordability of homes due to the new lending rules is not just a concern in this province. He said the CREA has been lobbying the federal government for a “regionalization” of the mortgage stress test across the country.
Coun. George Chahal, who intends to present a notice of motion next week asking the city to advocate for a regional approach to lending rules, said he has already seen the effect of the new mortgage rules in his ward and is worried it will only get worse.
And with the city approving 14 new communities last year, Chahal said he’s also heard from developers concerned about the softening market and the effect construction delays and slow housing absorption could have on their businesses.
“The unintended consequences are with a slowing construction industry, there could be more job losses. We’ve already seen a number of layoffs,” he said.
“This is the wrong time to slow down an economy which has already been slowing and petering into recession.”
The mortgage stress test, which aims to reduce the amount of debt homeowners and financial institutions can take on, applies to all Canadian homebuyers — even those who make a down payment of 20 per cent or more. Kenney said the rules made sense for Toronto and Vancouver, where real estate speculation has been rampant, but should have been applied in a “geographically targeted way.”
He added the UCP is also interested in working with provincial credit unions and ATB Financial branches to help Alberta buyers sidestep the rules. Only federally regulated lenders are obligated to apply the stress test, though many other lenders have been voluntarily applying it.
Speaking to reporters in Calgary on Wednesday, Premier Rachel Notley said calling for the removal of the mortgage stress test for Albertans is something the NDP government could “look into,” but she cautioned that Albertans actually carry a high level of debt relative to other Canadians.
“We need to be careful that we don’t find ourselves in a situation where people are taking on debt they can’t manage,” she said.
In an email, Pierre Olivier-Herbert — spokesman for federal Finance Minister Bill Morneau — said the mortgage stress test was created to help protect the financial well-being of homebuyers.
“For many middle-class Canadians, their home is the most important investment they will make in their lifetime,” Olivier-Herbert said. “That is why we have taken action to contain risks in the housing market, irrespective of market conditions.”
While resale sales activity is expected to remain low for the duration of 2019, CREB said there are signs the Calgary housing market is starting to adjust to slower sales. That should help reduce some oversupply in the market and put the industry in a more stable position by 2020, CREB said.
The benchmark price for a detached home in Calgary declined 1.2 per cent year-over-year in 2018. It hit a low of $481,800 in December 2018, down from $521,600 in October 2014.
Via. Amanda Stephenson, Calgary Herald 01/31/19