The federal government, concerned about sky-high real estate prices in Vancouver and Toronto, announced Friday it will make new buyers come up with a heftier down payment starting in mid-February.
The move was part of a three-pronged effort aimed at lowering risks in the housing market, though Finance Minister Bill Morneau rejected the suggestion that Ottawa fears a real estate “bubble” in the two cities.
“We’re not talking about bubbles here,” he told reporters. …
“We are talking about ensuring that Canadians take the right approach to investing in a home. It’s to protect the market for the existing homeowners and it’s to protect new home buyers as well, so they have the appropriate amount of equity in their home.”
Morneau was asked by The Vancouver Sun why the federal government is targeting first-time buyers in cities like Vancouver, while doing nothing to deal with the alleged impact of speculators and foreign buyers driving up prices.
“You know, we are taking measured approaches to make sure we protect Canadians,” he replied.
“We are looking at how we can ensure the Canadians who already have homes recognize there is a stable housing market, and those people that are aspiring to have homes can be assured that their biggest financial investment is in a stable and effective market.”
Details of mortgage changes: [Effective February 15 of 2016, the minimum down payment for new Canada Mortgage and Housing Corp.-insured mortgages will jump from five to 10 per cent – though that extra five per cent will apply only to home purchase prices exceeding $500,000. In other words, the current minimum payment on a $500,000 house would be $25,000. If the house costs $600,000 a 10 per cent charge is levied only on the extra $100,000, bringing the minimum payment to $35,000.The new rule will not apply to Canadians who already hold mortgages, and doesn’t impact sales of properties of $1 million or more because they already require 20-per-cent down payments. Morneau, in a statement to reporters, made clear his concern in targeting homes in the $500,000-$1 million range was Vancouver and Toronto.]
“We are looking at how we can ensure the Canadians who already have homes recognize there is a stable housing market.”
Why does that even come up?
What’s with “protecting the market for the existing homeowners”?
Doesn’t a sound market inherently protect its participants?
If we really aren’t “talking about bubbles”, if prices really are driven by fundamentals, if there really is a “stable housing market” in Vancouver, why the need for any of these reassurances?
How many years has it been since Vancouver RE buyers have “taken the right approach to investing in a home”?
And, who can blame them? – how many years has it been since our government sensibly priced the risk of borrowing money?
“It’s a little disingenuous,” said Tom Davidoff at UBC Sauder School of Business. “They really mean they want to protect themselves” from a potential housing market meltdown spurred by imprudent buyers.
“If you have to put 10 per cent down on a house over $500,000, that doesn’t sound like the most crazy thing I’ve ever heard,” Davidoff said. “If people are like lemmings buying houses, when interest rates go up it protects them from jumping off the cliff.”
But that doesn’t place housing more in reach of home buyers or renters, Davidoff notes.
“It makes me nuts that nobody’s acting on the more obvious issue — that there’s an affordability problem. Trudeau should really have to answer for his lack of affordability policy. I’m a little mind-boggled by the lack of leadership there.”
– The Tyee, 12 Dec 2015