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cobran20

Canadian house prices set record as debt grows

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7 months later and the Canadian government continues to ramp up to efforts to cool the market.

 

http://www.thestar.com/business/2014/04/25/cmhc_again_moves_to_tighten_mortgage_insurance_rules_as_housing_market_cools.html

 

OTTAWA—CMHC is moving yet again to tighten the home mortgage market with changes that would make it more difficult for certain Canadians to obtain government-secured financing for real estate purchases.

The Canadian Mortgage and Housing Corporation says that as of May 30 it will no longer insure purchases by self-employed workers without third party income validation, and will offer no insurance on Canadians seeking to purchase a second property.

 

<snip>

 

CIBC deputy chief economist Benjamin Tal said the move was not a surprise, adding that more changes are likely coming to reduce the agency’s footprint in the market.

The Finance Department has tightened mortgage rules on four separate occasions in the past several years — along with requiring stricter enforcement and management of loans — in an effort to weed out marginal buyers and excessive speculation in the housing market.

Former finance minister Jim Flaherty had also expressed concern that CMHC had become too large a player in the market, needlessly exposing Canadian taxpayers to risk should there be a housing crash. The agency currently has about $560 billion in outstanding mortgage insurance on its books.

Flaherty and the Bank of Canada have for several years expressed concerns that too many Canadians risked becoming over-extended in the mortgage markets, especially once interest rates begin to rise.

However, earlier this week, Bank of Canada governor Stephen Poloz said he believes Canada’s real estate market is heading for a soft landing.

 

First they loosened lending rules in the GFC response.   But in the last few years things started getting hot so they reversed that position and took away 40 year mortgages, increased deposit requirements and removed insurance over $1 mil.   After that they closed the door on wealthy immigrants.

 

Yet the market keeps going up and up and up up up on thinning volumes.  Did they wait too long?   

 

article-1366670-0B3599DD00000578-410_964

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http://www.greaterfool.ca/2015/06/22/guess-what-3/

 

 

Well, back to the land of ‘roos, where cheap rates, property-friendly laws, house lust and politicians who can’t stop diddling the marketplace have made Australia like us. The media is real estate-crazed, veins run thick with hormones and everybody’s an amateur specuvestor. Like here, the horny masses have tried to blame offshore interests for their raging prices. Unlike here, Australia consequently adopted a mess of tough and discriminatory laws. They haven’t worked, of course, because foreign buyers may be visible, but they ain’t the cause.

The result of all this, say two housing economists ready to face lawmakers, is a ‘bloodbath’ in the making. Lindsay David and Philip Soos are well-researched and highly-respected dudes who would fit right in with this pathetic blog, as they believe there is absolutely no way a bubble of the kind now enveloping Melbourne or Vancouver can survive.

These guys claim there’s actually an oversupply of housing (think about the new condos going up in the GTA), just as there was in the US before the wheels came off the economy. Here’s a sample of what they will be saying:

“Contrary to the analyses of the vested interests, the data clearly establishes Australia is in the midst of the largest housing bubble on record. Policymakers are caught between a rock and a hard place, as implementing needed reforms will likely burst the bubble. Australian economic history and recent international events illustrate collapsing housing bubbles can quickly increase the number of unsold properties [stale stock], shattering the pervasive myth of a deleterious dwelling shortage. Falling housing and rental prices, including sales, would be a doomsday trifecta for investors as they suffer losses in both capital prices and net rental incomes.”

The economists sound eerily familiar when they argue that down-under property values have become decoupled from economic reality – bearing no relation now to incomes, rents, inflation or economic growth. “What event or set of events triggers the beginning of the end of the housing bubble is not yet known,” they say. “A bloodbath in the housing market, however, appears a near certainty due to the magnitude of falls required for housing prices to again reflect economic fundamentals.”

Hmmm.

So what does the Aussie finance minister (curiously named Joe Hockey) say in response? There’s no bubble, he argues, because people wouldn’t be buying houses if they couldn’t afford them. So buzz off.

JOE-modified.jpg?8f4c78  And what does our finance minister say? “It’s not a huge concern at this point,” insists Joe Oliver. “I’ve said again and again we don’t think there’s a bubble – the Bank of Canada agrees with that, CMHC and the OECD.” (Well, actually, the central bank claims housing in Canada is over-valued by up to 30% and the OECD has warned about excessive consumer borrowing.)

There is one big difference between Canuckistan and the Land of Matilda, however.

Australians will watch a formal inquiry into what’s driving the sexed-up market, how flipping,  and speculation have impacted prices, the impact of tax laws (like negative gearing) on real estate and how it might all be reformed. We get to watch Love it or List It.

 

I think Garth may not understand how vested the political capital is in RE down here but I do like his style...

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In the comments!

 

#11 Joe Hockey - Treasurer and Member for North Sydney on 06.22.15 at 8:13 pm 

Aye, Garth, there you go again. You’re such a dag.

Your analysis is simply not fair dinkum, like kangaroos loose in the top paddock.

There is no bubble here, it’s gone walkabout.

I have no idea what your pozzy is or what you do to make a quid, but you’re none too good at predictions.

Why don’t you grab your togs (or go in the nuddy) and an esky and climb back in your ute and head for the beach for the summer? Leave predicting to experts like meself. 

Stop spitting the dummy and being such a knocker.

Rack off, yobbo!

Edited by Dose

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