It’s getting harder to get a mortgage in the country, according to data from the Bank of Canada’s most recent survey of credit officers at major financial institutions.
This observation comes at a time when the construction of new housing is slowing down considerably in Quebec as elsewhere in Canada.
“Canadian banks are restricting their lending standards,” wrote Hugo Ste-Marie, director, portfolio strategy and quantitative analysis at Scotia, in a note to clients published Monday. On the consumer side, it appears to be much more difficult to obtain mortgage credit than other types of credit, suggesting that banks are sufficiently exposed to real estate risk at the moment and that they are not potentially endorse only consumers with an excellent credit score. »
Calls to Desjardins and the National Bank to find out what is going on on a daily basis did not yield an immediate reaction from them.
“It’s typical when there’s a market turnaround. Lenders are not sure where the value of real estate assets is going. In that time, they want less exposure to the real estate market,” comments Paul Cardinal, director of the Economic Department of the Association of Construction and Housing Professionals of Quebec (APCHQ).
The trigger, according to him, is the increase in the cost of funds for banks. “Following that, it is possible that the lenders want to take a small additional margin because they find the context more risky. It often happens in such an environment that lenders focus on customers with better credit ratings, longer business histories and deep wallets. If you’re a small builder in business for two or three years with a limited volume, it’s possible that you’ll have more difficulty finding financing now, unfortunately. »
For UQAM economics professor Philippe Goulet Coulombe, the housing market is going through an adjustment. “The evolution of credit conditions is a volatile indicator, but we see that conditions deteriorate when there are interest rate hikes like this year and in 2018 or when there is a major recession like in 2020. »
“It takes time for the effects of monetary policy to be felt,” continues the academic. We see it in this poll. I think we will continue to feel it. The market is slowly adjusting to this new environment. »
50% drop in housing starts
In response to rising financing costs, builders are slowing down. Less than 2,900 units were built in April, a drop of 48% compared to the same month last year. This is the eighth consecutive monthly decline. Everything is falling, houses like collective housing, and in all regions. After four months, the number of new units fell by 48% in the Montreal area.
These are unadjusted data. These are compiled by the Canada Mortgage and Housing Corporation (CMHC). It processes them to eliminate the seasonal effect and thus be able to compare the performance of April with that of March. On this basis, CMHC noted progress in April, with an 8% increase in the annual pace of housing starts compared to March.
Residential construction in Quebec is off to its worst start to the year since 2016, according to the APCHQ.
Clearly, the housing shortage can only get worse.
Paul Cardinal, Director of the Economic Department of the APCHQ
Mr. Cardinal predicted 46,000 housing starts this year. It has just lowered its forecast to 40,000. It is also preparing to lower its forecast for 2024.
“Right now, the projects are not getting off the ground, because there is a tightening of funding policies,” says Marc-André Plante, spokesperson for the Corporation of Property Owners of Quebec. We come to the conclusion that if there are no programs to stimulate supply, the crisis of the 1er July is going to be difficult and it will be even more so the following year. »