There is talk of possible government interventions aimed at preventing the housing market bubble from imploding.
“…if another rebound occurs, it will likely be triggered by Ottawa. The Harper government has repeatedly intervened to micro-manage the $2.8-trillion housing market.” …. “Ottawa may loosen mortgage restrictions once again if the housing market craters.” – ‘Avoiding the crash’, macleans.ca, 4 Sept 2010
The recently much publicized Canadian Centre for Policy Alternatives report ‘Canada’s Housing Bubble: An Accident Waiting To Happen’ [David Macdonald, Aug 2010], acknowledged the existence of the bubble, but then called for attempts to orchestrate an ‘orderly’ unwinding, concluding:
“Government policy makers, the Bank of Canada, as well as rate setters at the big banks need to work together to steer the Canadian market towards a soft landing. The alternative is not acceptable.” – CCPA report
At the very most any policy intervention would only forestall the inevitable crash. To cause an ‘orderly unwinding’ of a bubble you require an orderly and never-ending supply of buyers willing to take on large amounts of (albeit cheap) debt to buy assets that are falling in value and still grossly overpriced. That isn’t going to happen.
Where would those buyers come from? The vast majority of Canadians anywhere near qualified to buy have already been sucked into the vortex that is this market, and a large minority own far more RE than is good for them in the form of more than one property, or by being financially overextended by their principle residence. Mortgage rates are already very low, and when they recently dropped even lower, no new wave of buyers stepped up to take advantage of them. The ranks of the responsible buyers have been exhausted.
Whatever bizarre huckster-saleman plan a government comes up with (free money; first time buyer grants; 0/40 mortgages; free closing costs; 1 year of mortgage payments ?) would essentially entail dragging individuals into the market who shouldn’t be there in the first place.
“Home ownership rates in Canada are about as high as they can possibly go. In fact the only way to drive them higher would be to further increase the rate of sub-prime lending to allow completely unqualified buyers into the market.” – Daniel Gibbons, commenter at Macleans.ca 5 Sept.2010
Policy change to prop up the market via new buyers would simply delay and magnify the bust, not resolve it. The pool of people facing certain future financial hardships would grow even larger. If a government attempted to engineer this, clear-headed citizens would (1) object to it happening and (2) make sure that any politicians responsible for such foolishness were held accountable for their actions. The vast majority of literate and politically involved citizens are real-estate owners, and there is therefore an inherent conflict in them being able to step up and speak truth about the bubble. Almost everybody with any influence has been co-opted by the bubble. Therefore, unfortunately, we don’t expect to hear any loud public voices objecting to attempts to rescue the unrescuable. -vreaa