“This is a knee jerk reaction by idiot bankers pressuring idiot politicians that don’t understand that the condominium market in Ottawa, Vancouver, Toronto and Montreal is driven by investors.”

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.
-vreaa

10 responses to ““This is a knee jerk reaction by idiot bankers pressuring idiot politicians that don’t understand that the condominium market in Ottawa, Vancouver, Toronto and Montreal is driven by investors.”

  1. Brad Lamb is just “talking up his book”… Before 0/40 mortgages existed, 25 year mortgages were the norm… If you didn’t have at least 10% to put down, you could forget about even getting in the market. Brad is the man who wants to ride this gravy train for as long as he can… and everyone else doesn’t “understand”… His concern for first-time homebuyers is hypocrisy at its finest. His sole concerns are for his own pocketbook and ego…

  2. How it wasn’t at 100% in the first place is really puzzling….

  3. Speculator alert! There is a 2 bed ground floor condo, 1000sq feet, tucked in next to Granville Island that has been for sale and empty over a year now. The building doesn’t allow rentals. It gets a ton of walk by traffic. They want $600,000 for it and I don’t think the price has moved. It’s leasehold, til 2038 (?) and the maintenance is about $500 a month. It just kills me that this place sits, unused, neglected, costing someone at least $500 a month. That is the insanity of this speculative market.

  4. Speaking of leasehold, does anyone else remember when real estate listings were informative enough that the number of years remaining on the leasehold was included?

  5. “Lowly first time buyer”. Says all you need to know about Brad Lamb.

    Wolf in lamb’s clothing?

  6. I guess condo developers can breathe a sigh of relief as condo fees are left out of the equation once again. As perverse as it sounds, I am betting the new mortgage rules will actually light another fire under the Vanc RE market as we saw last spring when similar rules were introduced (in addition to implementation of the HST) and market activity surged in advance of these changes. The MSM is already working hard to get this message across: (http://business.financialpost.com/2011/01/17/what-you-can-save-with-new-rules). Perhaps this is what TPTB are really trying to achieve?

    The new rules don’t really effect all those folks who have already borrowed excessively and are currently “in debt up to their eyeballs” (http://www.youtube.com/watch?v=hn5EP9StlVA) …well, at least in the short term. In addition, these so called tougher rules probably mean that interest rate hikes aren’t coming any time soon and the game of kicking the can down the road can continue on for a while longer. So much for their master plan to rein in household debt.

    Expect underwriters at the various banks to racking up quite a bit of overtime over the next two months as they get flooded with piles of new mortgage/refinancing applications .

    • You know what? As much as I want to see this madness come to an end for the time being I want it to continue. I have a few things to take care off this year and this will go a lot better when idiots continue to throw money away they don’t have.

      I still expect the real hurt to start in 2012 / 2013 when the 2008 bargain basement priced mortgages will start to reset.

      • Do you have insight on what type of mortgage most homebuyers are using up there? I’ve heard that a five-year reset is common in Canada. Is that true? Is it more common than just taking out a 25- or 30-year fixed rate mortgage?

      • Do you have insight on what type of mortgage most homebuyers are using up there? I’ve heard that a five-year reset is common in Canada. Is that true? Is it more common than just taking out a 25- or 30-year fixed rate mortgage?

        Five years is very common, ten years is also possible.

        Years ago I was trying to find out if I could get a 25 year mortgage, officially banks do not offer those but talking to some mortgage brokers it can be obtained, albeit back then nobody could give me details because apparently it’s “not desired” or some such.

        Not being born and raised here it still puzzles me how much of a lottery many people seem to play with their mortgages. 5 year re-sets and variable rates? Dunno, but the bigger the debt, the more predictability I want, not necessarily the best deal (for a time).

  7. “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.”

    An investor needs to sell their asset at one point or the other. If not the asset isn’t really worth anything.

    If this “only affects the lowly first-time buyer” then by extension it will also affect the investor.

    This is pretty much as stupid of a statement as the dolt economist with one of the banks a few months ago who essentially said: “Nothing to worry about with regards to house prices. People in Canada will not just walk away from their mortgage like they do in the US, instead they will save money somewhere else.”

    Talk about a disconnect, in both cases.

    The scary thing for me is that these are the people the decision makers are listening to. *shudder*

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