The mortgage stress test isn’t just holding back Canadian home price growth and sales — it’s leading to declines in Canada’s most expensive market.

Plummeting sales and home prices across Greater Vancouver in April were the lingering result of the federal government policy introduced more than a year ago, the local real estate board says as it releases last month’s market data.

“Government policy continues to hinder home sales activity. The federal government’s mortgage stress test reduced buyers’ purchasing power by about 20 per cent, which is causing people at the entry-level side of the market to struggle to secure financing,” says Ashley Smith, REBGV’s president, in a statement.

A total of 1,829 homes changed hands in the region last month, down 29.1 percent from a year ago. Meantime, the benchmark price for all homes was $1,008,400, a decrease of 8.5 percent from April 2018.

April marked the 16th month since federal policymakers expanded stress testing — a common part of the insured mortgage application process — to the uninsured segment.

The change means that even with a downpayment of 20 percent, the bare minimum required to avoid insuring a mortgage, an applicant still needs to qualify for their loan at a rate that is 200 basis points above their contract rate. If a bank if offering 3.5 percent, the applicant must prove they can keep up with monthly payments at 5.5 percent.

In April, detached home prices were hardest hit, falling 11.1 percent on a year-over-year basis to a benchmark of $1,425,200. Condo apartment prices fell 6.9 percent over the same period to $656,900.

Activity in both segments was slower but in this respect condos were hardest hit. Condo sales totalled 885, 32.3 percent down compared to a year ago, while detached transactions numbered 807, falling 27.4 percent annually.

“Suppressing housing activity through government policy not only reduces home sales, it harms the job market, economic growth and creates pent-up demand,” Smith continues.

With some would-be homebuyers unable to qualify for a loan from a big bank or credit union, there has been increased interest in the non-traditional loan marketplace, which is not subject to federal regulations like the stress test. Other homebuyer aspirants have simply delayed purchases.

Partly as a result of the latter, at the end of April, there were 14,357 Vancouver homes on the market, versus 9,822 listings at the same time last year, representing an increase of 46.2 percent.

“There are more homes for sale in our market today than we’ve seen since October 2014. This trend is more about reduced demand than increased supply,” says Smith.

“The number of new listings coming on the market each month are consistent with our long-term averages. It’s the reduced sales activity that’s allowing listings to accumulate,” she continues.

Vancouver Home Sales & Prices Took Another Big Hit Last Month by Josh Sherman | Livabl