Comments on: Canadians Are Going To See A Huge Reduction of Borrowing Power… On Top of Stress Tests

By: Beh G.

Beh G. — Sat, 13 Jan 2018 07:31:52 +0000

In reply to Leo S.

I’ve hears this 20% number thrown out everywhere but doing the math, the number is actually as high as 37%!

If you were to take out (i.e. could afford)a $100k mortgage in January 2016 w/ 25 year amortization and fixed 5 year mortgage at 2.39% your total mortgage payments would have been $443.

If you take out a $100k mortgage now with the same amortization at 6.99% you will qualify for a mortgage of just over $63,000 (i.e. 37% less).

And that’s before the now-almost-certain bank of Canada rate hike on Wednesday and potentially two more hikes later this year.

By: Tommy

Tommy — Sat, 13 Jan 2018 00:54:01 +0000

In reply to Trevor. Great point, Trevor. If the housing market collapses, so goes the economy, too.

By: Tommy

Tommy — Sat, 13 Jan 2018 00:53:16 +0000

In reply to Leo S. Good catch, Leo.

By: Jim

Jim — Fri, 12 Jan 2018 19:20:58 +0000

In reply to C. The best comment the most likely outcome. You took the words our of my mouth.

By: John

John — Fri, 12 Jan 2018 18:32:40 +0000

In reply to Dusty Hill.

I think you’re missing a fundamental fact. Housing is at the root, not an investment. It is a necessity of life which everyone must have.

Unless humans stop reproducing, there will ALWAYS be first time buyers. If that means the market has to shift downward for them to get in, so be it.

This is why it is pure nonsense that –Vancouver more so than Toronto– we have been feeding first time buyers handouts to keep them coming to market.

Remove the credits, remove the rebates, remove HBP and let the market adjust to what is fundamentally affordable price.

By: Dusty Hill

Dusty Hill — Fri, 12 Jan 2018 17:22:40 +0000

In reply to Mich. If there is no firstimer, than the step up buy is not happening either. That will put the pressure on prices to actually adjust to conditions of the market. Simply if there is no buyer there is no seller, unless you realize that your 750,000 shag is worth only 550,000. Why would you think that firstimers are screwed? Is that because they are house horny and can't wait no more? By historic standards and intl. accounting practices, the average price of the house has always been worth 3-4X the average family annual income. We are faaaar from that principle. OFSI as much as every attempt on every level of the government to extinguish idiot house prices is to save canadians from themselves.

By: Common Man

Common Man — Fri, 12 Jan 2018 17:20:59 +0000

I would like to add small experience, I lived in Argentina, Buenos Aires for 5 years. Price of real estate is ridiculously disconnected with the real state of the economy and purchasing power of a normal individual earning decent wages. USD$1= 15 pesos and Average studio apartment cost around USD $100K in Buenos Aires. Average salaries for young millennials are around 30K pesos/ month, the National average is 10K pesos/ month. Reason dirty money and foreign money. in the year 2011, 1 Peso was = $1 USD.
Keep in mind, There are a lot of similarities between Canada and Argentina, the population of Argentina is same around 35 million, natural resources-rich country and majorly European population. Both allow, foreigners, to buy and sell properties and both allow FDI in natural resources including farming and much more, we all know at the rate Canadian gov is selling state-owned companies to a specific nation, same with Argentina.
Remember the so-called foreign investors/ drug lords are using their dirty money to hide, they really don’t care how long they have to wait. If the market is majorly driven by these type of investors, except for prices of real estate to never go down. It may slow down but will never reduce. Hopefully, Canada is not another Argentina. The best solution is to go New Zeland way, stop all foreign and unaccounted investment in real estate and then only things will show real results unless based on local parameters no matter what we predict will always remain on papers and the Complete country will be like Vancouver.

By: EO

EO — Fri, 12 Jan 2018 17:17:42 +0000

In reply to bluetheimpala. Great point. Boomers account for 9.6 million (+/-30%) of the population according to the 2011 census and seniors 65+ now out number children based on 2016 census numbers and that's only going to grow.

By: Leo S

Leo S — Fri, 12 Jan 2018 16:53:25 +0000

In reply to Dan The Mortgage Man. > Conventional mortgages are 200 bps higher than the contract rate, or the BoC 5 year fixed rate, whichever is higher. Just to clarify this. The stress test is at contract rate + 2%, or the BoC 5 year posted rate, whichever is higher. It is *never* BoC 5 year + 2% as indicated in the article.

By: Bri-Bri

Bri-Bri — Fri, 12 Jan 2018 16:44:10 +0000

Does this mean long term compression of the Canadian real estate market? Also, can’t credit unions pick up the extra mortgages that fall out of the boat, since they aren’t regulated?