A recent news release from the Toronto Real Estate Board (TREB) paints a precautionary picture of Canada’s two hottest real estate markets, especially ominous for first-time homebuyers. TREB has reported that, compared to August 2011, the Toronto market saw a 12.4% decline in total number of sales, and a 5.5% decline in new listings. These figures are according to industry experts a product of the recent changes made by the Canadian Mortgage and Housing Corporation (CMCH), put into action by finance minister Jim Flaherty earlier this summer. Flaherty, in an effort to reduce increasing mortgage debt, reduced the amortization period for insured mortgages from 30 to 25 years.

The change was primarily an effort to curb the amount that first-time homebuyers were borrowing on their investments. While some claim the new rules prevent many first-time homebuyers from entering the increasingly expensive Toronto market, Ottawa as well as prominent financial institutions deem them necessary to control household debt, with many Canadians carry a debt-to-income ratio of a staggering 150%.

It comes as little surprise that a portion of the market has been effected by these changes; the Globe and Mail reported that between 35 to 40% of buyers make down payments of less than 20%, automatically requiring them to then take out mortgage insurance. Amidst these changes the market continues to price-out many initial investors, with average home prices rising 6.5% to $479,095.

Of particular concern is the overarching application of these new rules to what many consider to be two separate markets. Toronto’s housing market, composed of older houses in established neighbourhoods with little-to-no new build, versus the condominium market, composed of relatively new stock and a steady supply of new units.

While the condominium market reflects the CMHC changes, the housing market — where the average detached price has risen to $746,300 — is a different story, where prices are often too high to attract first-time buyers.