The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

The First-Time Home Buyer Incentive launches September 2, 2019*.

* The program will be ready to receive Incentive applications on September 2, 2019 (barring any unforeseen circumstances). The first closing will take effect on November 1, 2019

There was a continued decline in mortgage originations in the second quarter of 2019.

Originations fell 8.9% year-over-year with younger Canadians (18-25 years) showing a 13.4% drop according to the Q2 2019 Industry Insights Report from TransUnion Canada.

Although the report acknowledges the multi-factor impacts on mortgage originations including home prices, interest rates, consumer sentiment, and unemployment levels; it says that the regulatory changes introduced in 2018 have had a material effect on originations.

“The new mortgage regulations seem to be having the intended effect in cooling the overheated housing market and broadly preventing consumers from overextending themselves with mortgage debt. This is now the fourth consecutive quarter we have seen a decline in both mortgage originations and balances,” commented Matt Fabian, director of financial services research and consulting for TransUnion Canada.

He added that there are signs of some potentially unintended consequences.

“We have started to see an uptick in co-borrowing as the means of getting a foothold on the property ladder, where multiple consumers make an application together – in effect combining the power of their salaries. Although this is nothing new, it is now often with the help of a parent, other relative or a friend rather than just a partner or a spouse,” said Fabian.

Other debts are rising

While mortgage originations were lower, the report shows that Canadians continued to load up on other debts.

Overall consumer credit balances continued to grow in the second quarter—up 4.3% compared to the same period a year ago—bringing total outstanding consumer credit to $1.88 trillion.

The number of consumers with access to credit grew 1.7% year-on-year (YoY) in Q2 2019.

The average non-revolving balance per consumer grew 6.2% year-over-year to $31.4K in Q2 2019. This figure was primarily made up of installment and auto loans but excludes mortgages.

Borrowing for revolving products (including credit cards and lines of credit) saw a slight drop, down 1.2% YoY to end Q2 2019 at $18.5K.

The increases in overall borrowing have been driven by lower interest rates and low unemployment; and consumers have been managing their debts well so far with delinquency rates stable over the past year.

However, as the economy slows and risks of an economic downturn remain prevalent, it will be important for consumers to manage these higher debt levels diligently to remain current on their obligations,” warned Fabian.

Line of credit originations were the strongest in Q2, up 13.9% year-over-year.

Gen X lead debts

The largest cohort in terms of total debt balances in the second quarter was Gen X with a combined $767.4 billion, an increase of 3.4% year-over-year.

However, Millennials are catching up fast with a 12.33% year-over-year increase taking their overall debt to $515.9 billion. Gen Z gained 50.53% to $24.8 billion.

Older Canadians reduced their overall balances: Baby Boomers by 1.8% to $514.3 billion and the Silent Generation by 7.45% to $52.5 billion.

“At a headline level, the consumer credit market continues to grow. However, growth hasn’t been uniform, and in major categories like mortgages, we continued to see a decline in origination volumes when compared to the same period a year ago,” continued Fabian. “The shift in focus toward non-revolving credit products is something we’ve seen over recent quarters. The rise of Millennials, who have equaled and slightly surpassed Baby Boomers when looking at outstanding balances, is having a fundamental impact on the approach lenders take to how they market to and service their customers.”

A global ranking of luxury housing markets has highlighted the divergence of Canada’s two largest markets.

Vancouver remains at the bottom of the table of 46 cities worldwide compiled using Knight Frank’s global research network while Toronto ranks 13th.

The Prime Global Cities Index tracks the movement in prime residential prices of the 46 cities.

Second quarter stats show Berlin at the top with a 12.7% increase over the past 12 months but no movement in the past 3 months. The top 5 includes Frankfurt (up 12% over 12 months / 0% over 3 months), Moscow (up 9.5% / 1.8%), Manila (up 6.2% / 0.8%), and Geneva (up 6% / 1.7%).

Vancouver sits at the bottom with a 13.6% decrease in prices over 12 months and a decrease of 2.4% over the past 3 months.

It’s the only city among the 46 to post a double-digit decline. Other cities that have lost value over 12 months include Auckland (down 7.5%), London (down 4.9%), and New York (down 3.7%).

Meanwhile, Toronto posted a gain in prices of 3.8% over 12 months and 2.8% over 3 months, making it the highest-ranking city in North America among the 46, beating Miami (1.5% 12-month gain), San Francisco (1.2%), and Los Angeles (0.7%).

The British Columbia housing market showed improvement in July with residential sales up 12.4% year-over-year.

The latest assessment of the market from the British Columbia Real Estate Association reveals 7,930 home sales through the MLS system in July.

The average residential price in the province was $684,497, down 1.6% year-over-year but total sales dollar volume was $5.43 billion, a 10.5% increase from the same month last year.

“BC home sales climbed higher for the first time in 18 months on a year-over-year basis in July,” said BCREA Chief Economist Cameron Muir. Housing demand has also trended higher since March, rising 21 per cent on a seasonally adjusted basis. “Households appear to be adjusting to the tighter credit environment as the shock of the B20 stress test dissipates.”

Listings ease

While new listings in July fell 3% from the previous month on a seasonally adjusted basis, inventory was 12.4% above that of a year earlier with 41,621 units available for sale.

Sales-to-active listings ratio at 19.1%, similar to a year earlier.

Year-to-date, BC residential sales dollar volume was down 18.9% to $30 billion, compared with the same period in 2018. Residential unit sales decreased 14.4% to 43,612 units, while the average MLS® residential price was down 5.3% to $687,413.

The recent slowdown in Canada’s hottest housing markets is turning a corner and a potential new price boom is threatening to frustrate would-be buyers’ hopes.

The real risk to Canada’s housing market today is not a crash, but a return to nosebleed levels of price growth thanks in part to falling interest rates, said Doug Porter, chief economist at Bank of Montreal.

Policymakers will have to “be ready to wield some tough measures” if they want to prevent housing costs from becoming even more unaffordable, Porter told HuffPost Canada ― though he said he would “leave it to policymakers” to decide what those should be.

The latest data from the Toronto and Vancouver real estate boards shows the markets shaking off foreign buyers’ taxes and the mortgage stress test. Home sales jumped 24 per cent in both cities in July, compared to a year earlier.

Much of that has to do with more affordable mortgages. The collapse in interest rates on government debt around the world in recent months has pushed down the rates Canadian lenders can offer.

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