The bull and bear case for the Lower Mainland’s real estate market

Current policies, such as low interest rates and income replacement programs, not only prevented a real estate crash in 2020-2021 but pushed prices much higher.

The bull case for real estate is founded on the historically low interest rates and unusually high rate of savings among Canadians — this combination is positive for real estate.

In response to the hot market, as of June 1, the Office of the Superintendent of Financial Institutions is proposing to increase the floor of the stress test for uninsured mortgages to 5.25 per cent.

Buyers who need to qualify under the current, more favourable, stress test rules must now find a property and complete their purchase before June 1st.

Overall, as the stress test change only affects buyers who have at least a 20 per cent down payment, I don’t think it will have a meaningfully impact on housing affordability.

Ultimately, it will be higher interest rates that will cool real estate prices.

If or when rates increase, real estate prices should moderate and then trend down — which is healthy for a market.

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