Effects of Macroprudential Policies on Housing Prices in Smaller Markets

Abstract

This paper investigates the impact on housing prices of smaller census agglomerations when the maximum amortization period on high risk mortgages is changed. The Canadian government makes its decisions to change the maximum amortization period on high risk mortgages when they want to change the level of market involvement of at-risk buyers or to cool the housing markets in Toronto and Vancouver. After studying the housing markets in 19 Ontario regions from December 2005 to December 2015, I find that some of the smaller cities are negatively affected by these blanket policies and that investment factors may negate the targeted effects of macro-prudential policies.