“Some are now wondering if Canadian policymakers and bankers might not be too sanguine about the housing strength in Canada, specifically in Toronto and Vancouver. While the Canadian situation is far different from the U.S. of 2006, the continued surge in condo construction and overall home prices to levels that are not consistent with the growth in domestic income is certainly raising questions about its sustainability and the fallout if it were to unwind.” ..
“…mortgage rates have nowhere to go but up… eventually. Investment activity and foreign purchases in the condo market are not fully understood or predictable. Corrections in housing do occur and they can occur suddenly, so while this is not a red alert, we are not flashing green, either.”
- excerpts from ‘The Bubble Debate in Canadian Housing’, a note to BMO clients from Dr. Sherry Cooper, Executive Vice President and Chief Economist, BMO Financial Group, Jan 2012 (Cooper is rumoured to have her $3M Toronto ‘mansion’ on the market). [hat-tip ZRH2YVR]
“Bank of Montreal, Canada’s fourth-biggest bank, dropped the rate for a five-year fixed-rate mortgage by 50 basis points, or 0.5 percentage points, to 2.99 percent on Jan. 12, the lowest in its 195-year history. Toronto-Dominion and Royal Bank, Canada’s two-biggest lenders, followed suit the next day with the same rate on a fixed four-year loan.”
- from ‘Canada Bubble Seen as IMF Risk With Record Low Rates’, San Francisco Chronicle, 17 Jan 2012
Further from the same article:
“Kevin Lau, a Toronto-based technology consultant, says he can’t wait to take advantage of the lowest mortgage rates in Canadian history to buy a second condominium and rent his current home.
Lau, 28, plans to get another mortgage and refinance his C$160,000 ($157,000) home loan after Bank of Montreal, Toronto- Dominion Bank and Royal Bank of Canada cut borrowing costs last week.
“It’s always tempting when the credit is available at much lower rates than they ever have been,” said Lau. “The fact that house prices have been going up and continue to go up much faster, you need to really take advantage of it.”
Perhaps Lau can “take advantage” of BMO record low rates to go all out and buy Dr Cooper’s ‘mansion’.
It won’t happen literally, but in principle, it is happening: those in the know selling to what may be the last wave of ignorant buyers.