It may have helped to save the Toronto region from a far nastier reckoning when the housing market sagged in 2017 and Canada’s mortgage stress test may still prove to be the life-jacket that prevents Canadians from drowning in debt should the economy falter.

Still, the Ontario Real Estate Association (OREA) continued to insist last week that the stress test is shutting millennials out of the housing market and contributing to a decline in home ownership.

With a federal election approaching, the “disastrously flawed” stress test “is an urgent issue that needs to be addressed,” said OREA CEO Tim Hudak.

“Only the federal government can address these harsh one-size-fits-all mortgage restrictions,” he said.

Despite Hudak’s comments, though, most experts say that following an 18-month, policy-induced slump, the Toronto region’s residential real estate market is recovering nicely — and the numbers seem to back that up.

Royal LePage predicted Toronto area home prices would show a modest 1.4 per cent gain this year. The Toronto Real Estate Board (TREB) reported a 10.4 per cent rise in re-sale home transactions in June, part of an 8.5 per cent sales gain this year to date.

RBC’s Monthly Housing Update noted that home sales were up 0.2 per cent month over month in the Toronto area in June — on top of a 19 per cent gain in the three prior months.

“The level of activity in Toronto isn’t much below normal levels anymore,” it said.

Royal LePage CEO Phil Soper is among those who believe the region has recovered from the correction that following the announcement of Ontario’s Fair Housing Plan in April 2017. He said the region now has a window of opportunity to improve affordability by building rentals and ownership homes that will stave off a future housing availability crisis.

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“The ground this recovery is being built on is not as firm as that of few years ago,” said Soper.

“There are so many geopolitical wild cards that could send the economy, along with home prices, tumbling, including a knee-jerk trade dispute driven by the administration in Washington.”

“Even things like the soft demand that Bombardier is seeing for its rail car exports — the manifestation of (U.S. President Donald) Trump’s Buy America policies — could have subtle effects on slowing the market,” said Soper.

There is no way to anticipate those kinds of events but Soper said the mortgage stress test — introduced by Canada’s Bank regulator, the Office of the Superintendent of Financial Institutions (OSFI), on Jan. 1, 2018 — gives policy-makers another tool to stimulate the market in the event of a sustained correction.

The stress test requires consumers to qualify for a mortgage at a rate 2 per cent higher than that which banks are offering or 2 percentage points higher than the Bank of Canada’s five-year rate.

Canada Mortgage and Housing Corporation CEO Evan Siddall has defended the test as necessary in protecting home buyers from over-indebtness.

OREA takes issue with its lack of flexibility for first-time buyers and wants it eliminated for homeowners renewing their mortgage with a different lender. It also favours a return to 30-year amortizations. (The 30-year amortization rule was reduced to 25 years in 2018 for buyers putting less than 20 per cent down on a home. That term is still available for conventional mortgages.)

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But given the rebounding market, OREA’s position doesn’t make sense to Toronto real estate broker John Pasalis. He tweeted a sharp rebuke to the association’s position, writing that, “OREA, unhappy with double-digit sales growth in the GTA, calls on Ottawa to relax mortgage rules in order to fuel another housing bubble and to bury millennials in debt.”

Mortgage broker Robert McLister of RateSpy.com says there are still reasons to be concerned. He said the stress test is driving some consumers to more risk with non-regulated lenders.

“You don’t just tell people they can’t buy if you’re not going to shut off all other avenues for them. A certain small percentage will seek out other ways to buy if they’re shut down at a bank. That’s just fact,” said McLister.

He said it has taken an unusually long time for banks to bring down their fixed rate, the percentage banks use to calculate a borrower’s hypothetical mortgage payment. This week it fell from 5.34 per cent 5.19 per cent — the first drop since May 2018. It means that a consumer making $100,000 a year with 20 per cent down can afford to spend another $8,300 or 1.4 per cent, wrote McLister. (His calculation is based on a 30-year amortization and the borrower having no other debts.)

TREB doesn’t expect much change in the market’s modest performance for the balance of 2019. It is predicting the average home price will be about $820,000 by the end of 2019, a 4.1 per cent gain over the $787,300, 2018 year-end average, according to Jason Mercer, director of market analysis.

But there is some upward price pressure due to tighter market conditions, he said.

“One of the things that gets forgotten in the discussion and especially the last couple of years, as sales have been off their peak, is that we really haven’t seen any movement in new listings. In fact we’re starting to see a decline again on a year-over-year basis in the number of listings going on the system,” he said.

The stress test has probably also driven some buyers out of the expensive Greater Toronto Area altogether, said Mercer.

That interest in secondary centres is probably helping stabilize Toronto home prices because it is taking just that much demand off city housing and redistributing it, said Soper.

“You look at the popularity and tighter market conditions of places like Hamilton and Kitchener and Guelph and Barrie, these types of locations that, as the share of income required to cover housing has increased, certainly people have looked at other housing options,” said Mercer.

He added, however, that immigration means that the Toronto region’s population will continue to grow and fuel housing demand.

Even with that much-maligned mortgage stress test in place.

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