Brad Lamb, Toronto condo developer, in response to suggestions that 100% of condo fees be taken into account in calculations of allowable mortgage sizes by income level [a move that would reduce the qualified mortgage by about 13%], as cited at canadianmortgagetrends.com 15 Jan 2011 –
“A lot of people are going to get locked out of buying a condo, which, in most cities in Canada, is the most affordable option for housing…It’s a terrible idea.”
“All it is is a knee jerk reaction by idiot bankers pressuring idiot politicians that don’t understand the nature of the condominium market in Canada. What is driving the condominium market in Ottawa, Vancouver, Toronto and Montreal is investors. This won’t affect them. This just attacks the lowly first-time buyer.”
Last week the CREA took pre-emptive action against mortgage tightening; this week saw the condo developers join in. We hope that the Minister of Finance has the fortitude to make decisions that are in the long-term economic best interests of the citizens of Canada, rather than keeping things loose in a way that’ll benefit the minority-but-vocal vested interests.
We do agree with this developer in one major way: The condo market in Vancouver IS driven by ‘investors’. These speculators are holding deeply cash-flow negative properties, purely for assumed future price gains. When prices drop, that premise will disappear, these players will evaporate, and the market will crash. At some point condos may lead the way in Vancouver, but we fully expect all other sectors to collapse thereafter. Move-uppers will disappear, the high-end will plummet, even the market darling areas will collapse. In the end the percentage drops will be about the same in all sectors.