That’s why I said foreign buyers affect the market psychology , but it’s the purchases by local Canadians that set the actual market value.
In 2018-19, when the OFSI increased the stress test for low down payment, higher risk buyers, all it took was BOC/Fed rates to nudge up slightly, and housing sales volumes (in BC/Metro Van/Lower Mainland) dropped 30-50% , depending on area and housing type (strata vs SFD), while prices dropped 15-25%. Listings numbers were average to above average, shifting the market to a buyer’s market for the first time in ages (that’s when we bought our home on the island).
During that time, the percentage of those foreign speculators paying cash for leaky Vancouver condos and Richmond McMansions didn’t drop significantly, but the number of local buyers did, and hence, prices overall dropped as well.
Then, of course, COVID happened, rates dropped to near zero, listing plummeted, and FOMO took over once again.
If lenders assumed 100% of the risk, they would implement stress tests much stricter than OFSI, and as a result, fewer buyers would qualify at current prices (although prices have been dropping as rates have risen).
The FIRE industry is a much bigger portion of Canadian GDP than in the US (same for fossil fuels), and so they have an outsized influence on Canadian politics.
The FIRE industry has largely succeeded in redefining “affordable” as how much debt a buyer can qualify for, rather than a sensible ration between median incomes and median housing prices (usually defined as housing that costs 3-4 times the median annual income, not 12+ x annual income, as in Metro Van)
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