How will mortgage changes affect prices?

As a homebuyer (or seller), you probably have one main question when it comes to the Federal government's new mortgage rules: How will these rules affect me? 

To be honest, nobody knows for certain - and anyone who seems certain is a downright liar who's probably trying to sell you something. We can, however, hypothesize.
For example, we can assume that with maximum amortizations set at 25 years, limits on refinancing, and the disappearance of mortgage insurance for million dollar-plus homes, those at the bottom of the financial pyramid will have a more difficult time buying homes. But if there's a lack of demand, we'll have to see a drop in prices, right? Well, that's where it gets a little tricky.
According to this article in the Vancouver Sun http://www.vancouversun.com/opinion/Mortgage+rules+lower+prices/6890026/story.html), if you live in a land-constrained area - like Vancouver, Toronto, or Montreal - chances are a curb in demand isn't going to curb housing prices, because there's still a shortage of land to go around. The argument is that, when there's not very much supply anyway, a little less demand isn't going to cool the housing market.
While we don't really agree with that theory - if there's zero demand, it doesn't matter how much supply you have - we definitely see the argument. And while the pool of buyers in those areas will likely become smaller, there are still a lot of high-spenders willing to inflate housing prices. Compared to the rest of the world, Canadian real estate is cheap - and foreign investors see it as a great opportunity to get in at the ground level. Many of them are also dealing with cash, so the mortgage rules don't affect them.
The notion of rising interest rates deflating the hotter housing markets is also a concept up for debate. While many believe that housing will become more affordable once the Bank of Canada starts increasing rates, others are sceptical. After all, rates were increased in Australia and New Zealand with no affect on escalating housing prices.
It should also be noted that a 1% increase in interest rates will cost $100 more per month on a $200,000 mortgage (with a 25 year amortization). So while other people are being affected by affordability, you will be, too! That being said, even a little less demand will make it slightly easier to breathe in Canada's hot markets. Maybe instead of 10 people bidding on a home, there will only be 5. Or maybe that fixer-upper will go for list, instead of $50,000 above. Only time will truly tell...