“To hear Canada’s banks, industry groups and even the Conference Board tell it, the slowdown that descended on many Canadian housing markets over the summer is the fault of the strict new mortgage rules Flaherty put into place this past June.
“To the surprise of no one, following the introduction of the most recent rule changes, sales activity ratcheted down,” said Gregory Klump, chief economist at the Canadian Real Estate Association, in announcing a 15.1-per-cent year-on-year decline in home sales for September.
The Toronto Real Estate Board chimed in: “Some households have put their home purchase plans on hold in response to the higher cost of home ownership brought about by the recent changes to mortgage lending guidelines.”
The industry has good reason to maintain this narrative. For one, it makes it seem like falling sales volumes and prices are all “part of the plan,” nothing to worry about. (Not true.) And it also deflects uncomfortable questions about the role of real estate developers, agents, banks and industry groups in creating the inflated house prices Canada has seen in recent years.
The media are happy to go along with it, because it offers a neat and simple explanation for why Canada’s decade-long housing boom is coming to a halt. The only problem is, this isn’t what’s happening.”
“However you slice it, this is one phenomenon that you can’t pin on last-minute regulatory changes. So blame it on excessive debt. Blame it on over-enthusiastic realtors, or homebuyers who have finally drawn a line in the sand on house prices.”
– from ‘Canada Housing Slump: Flaherty’s New Mortgage Rules A Scapegoat For A Much Bigger Problem’, Daniel Tencer, Huffington Post Canada, 2 Nov 2012 [hat-tip to kf and other readers]
Blame it on a speculative mania that has turned.
See the main thought of this article previously listed as one of the ‘Erroneous Causation Theories For Falling Prices’.