Recent government policy changes have made it harder for Canadians, specifically first-time buyers, to purchase a home, finds a report by Mortgage Professionals Canada.

In fact, homeownership in Canada is at 67.8%, down from 69% in 2011, notes the report. And ownership rates fell sharply for the youngest age groups (first-time buyers)—by more than 4%.

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“The homeownership rate in Canada has fallen, as young middle-class Canadians have found it increasingly difficult to make first-time purchases,” says Will Dunning, chief economist for the association and author of the report. “With the recent further tightening of mortgage rules, ownership challenges have been intensified, and the ownership rate is very likely to fall further.”

The report adds this trend is likely to continue as a result of the upcoming implementation of new B-20 underwriting guidelines.

“The market is already slowing under the weight of increased interest rates, and policies aimed at suppressing the market further might be adding to economic risks,” says Dunning.

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Here are some more highlights from the report:

  • 6% to 7.5% of all potential buyers, insured and uninsured, will be unable to purchase a home as a result of the stress tests.
  • By the next federal election, 200,000 Canadian families will have failed the new uninsured stress test.
  • In 2018 housing activity in Canada may fall by 12% to 15% compared to 2016, which could dampen economic growth.
  • Over the past 12 years, mortgage credit growth has averaged 7.3% per year. The growth rate has slowed to a current 5.9% and projected to be 5.5% for 2018.

Not all is gloomy

Despite rising housing prices and government intervention, the majority of Canadians view real estate in Canada as a good long-term investment, according to the report. Further, the majority of Canadians view mortgage debt as good debt.

“During the past decade, some commentators have taken a negative outlook of the housing market,” says Paul Taylor, president and CEO of Mortgage Professionals Canada. “Yet, Canadians have consistently shown confidence in residential real estate. These surveys have told us repeatedly that Canadians are happy with the real estate decisions they have made.”

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The report also makes clear that Canadians are motivated to repay their mortgages. Each year, approximately one-third take actions that will shorten their amortization periods. Significantly, mortgage arrears have remained very low in Canada, and have fallen further to just 0.24%.

“The data clearly shows that the best policy to protect the mortgage market is to protect the jobs of Canadians, because history shows us that as long as they have jobs, they will meet their obligations,” states Taylor.

The report also says that Canadians have a lot of equity in their homes and are well positioned should a housing decline occur.