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Residential real estate sales may suffer from looming stress test

Potential property purchasers may not be able to afford as much house as they initially thought thanks to a looming mortgage stress test. The demand for residential real estate is expected to drop in Alberta, particularly in the Calgary area. This thanks to the federal government's new mortgage rules that raises the bar in terms of the amount of loan for which purchasers will be able to qualify.

For instance, if potential homebuyers can get a rate below prime -- say at 2. 5 per cent interest -- the stress test will need to show that they would be able to handle a mortgage at a bank prime rate, whatever that may be. Essentially, it makes home buying much more difficult, especially for first-time purchasers.  Basically, the government wants to ensure homebuyers would still be able to afford their mortgage payments if the interest rate should be hiked. 

Economists predict that the slump this test will bring to the real estate market will be offset by a predicted economic upturn and new home builds in a variety of prices. However, many people are planning on purchasing before the test comes into effect shortly, according to the Calgary Real Estate Board. The board is expecting demand to fall considerably over the next few months.

Yet, residential real estate deals will continue to be made across Alberta. Those deals need the experience of a lawyer savvy in real estate law. Whether his or her client is a purchaser or a seller, a lawyer will always ensure his or her client's best interests are covered in any contractual agreements. In markets like these, having a lawyer look over a contract is a wise move.

Source: cbc.ca, "Mortgage stress tests expected to lower demand in Calgary", Reid Southwick, Jan. 3, 2018

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