The Canadian government changed the rules for CMHC insured mortgages in Canada.  For mortgages over $500,000 the buyer will be required to deposit 10% of the value of the home over this number.   Prior rules implemented by the government  and the banks have encouraged larger down payments and so for most buyers this should not be a problem.  the question is whether this will help slow the heated markets in Toronto and Vancouver while the rest of the country is cooling.   So why is real estate so expensive in the GTA?

Part of the answer can be found in Provincial Government Policy. The Green belt along with Lake Ontario has created a restriction on new home development.   For a family looking for a detached home there is less options because there is less development land.  You need to go further afield to find product.   Governments have also greatly increased the cost to build over the last ten years with complex and expensive approval processes and very high development fees to name a few.

Within traditional neighbourhoods in Toronto there is simply too many people wanting to buy the same product.   Some Buyers who take a long term view are willing to pay more and this new 10% rule will not change this.   Parents using there savings to help their children and investment money from overseas is also bidding up the price of property.  Many immigrants and investors see homes as a good long term investment and will pay accordingly.

So who gets hurt when the government starts to put restrictions on borrowing?  It is the family of average income who wishes to own a home.  Many towers being built today do not lend themselves to family life, lacking room for children, green space and schools.  So will this policy slow the growth in home prices, we will wait and see.  Will it end the demand for detached homes and bidding wars, I do not think so.  Will it hurt those that would like to own a home with modest means, I would say yes.