{"id":294,"date":"2015-12-04T08:49:20","date_gmt":"2015-12-04T16:49:20","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=294"},"modified":"2015-12-04T08:49:44","modified_gmt":"2015-12-04T16:49:44","slug":"canada-faces-house-price-dilemma-in-push-to-tighten-mortgages","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2015\/12\/canada-faces-house-price-dilemma-in-push-to-tighten-mortgages\/","title":{"rendered":"Canada Faces House-Price Dilemma in Push to Tighten Mortgages"},"content":{"rendered":"<p style=\"text-align: justify;\">Canada\u2019s Finance Minister Bill Morneau faces a delicate decision on housing as his own officials push for tighter mortgage rules to cool Toronto and Vancouver real estate.<br \/>\nThe finance department recommended raising the minimum down payment on insured mortgages to as high as 10% from 5% for homes above a certain value, according to people familiar with the plans, speaking on condition they not be identified because the deliberations aren\u2019t public. While former Finance Minister Joe Oliver rejected the recommendation earlier this year, department officials raised the proposal again at an October meeting with industry representatives, according to one of the people.<br \/>\nMorneau, who replaced Oliver after October elections, said days into his new job that along with the budget, real estate was one of the first briefings he sought. That suggests policy makers are grappling with what, if anything, should be done to contain Canada\u2019s two most expensive markets without precipitating a major decline in cities like Calgary and Montreal, where prices are flat or falling.<br \/>\nCanada Mortgage &amp; Housing Corp., the government-backed housing agency, expressed concern about increasing signs of overheating in cities such as Toronto and Vancouver, while the Paris-based Organization for Economic Cooperation and Development urged the government last month to take steps toward reducing the risk to the financial system from high household debt and home prices.<\/p>\n<p style=\"text-align: justify;\"><strong>Million-Dollar Homes<\/strong><br \/>\nIn Vancouver, the average price for a detached home has jumped to almost $1.6 million, prompting speculation an influx of foreign buyers is behind the surge. A detached home in Toronto also averages more than $1 million.<br \/>\nForeign owners of condos comprised 3.5% of the market in Vancouver and 3.3% in Toronto, CMHC reported Thursday in a survey of property managers. That\u2019s up from 2.3% in Vancouver last year and 2.4% in Toronto.<br \/>\n\u201cOur foundations are strong overall, but a number of areas of vulnerability currently have our attention,\u201d CMHC Chief Executive Officer Evan Siddall said during a speech in Montreal where he introduced the report.<br \/>\nMeanwhile, prices in about a quarter of Canadian cities declined this year. Sales in Calgary, epicenter of the oil price shock, fell 29% in November from the same month last year, according to the city\u2019s realtor group.<\/p>\n<p style=\"text-align: justify;\"><strong>Divided Market<\/strong><br \/>\nHousing market conditions \u201cvary widely, with Toronto and Vancouver experiencing double-digit percentage price gains, Calgary and other oil-producing centres with soft housing prices, and most other centres with price growth of about 2 to 4 per cent,\u201d CMHC said in briefing documents prepared for the new minister after the Oct. 19 election. Bloomberg obtained the documents through an Access to Information request.<br \/>\nIn an attempt to target the higher-priced markets while sparing other regions, Oliver considered raising the required minimum downpayment, currently 5 per cent, on homes worth more than $500,000. He ultimately rejected the proposal, one of the people said. His department, which had recommended the measures be applied immediately, initially recommended an even lower threshold on concern $500,000 wouldn\u2019t have much of an impact, the person said.<br \/>\nUnder Canadian rules, home buyers must pony up at least 5% of the purchase price to qualify for mortgage insurance. Buyers putting 20% or more down aren\u2019t required to take out insurance. Finance Canada doesn\u2019t \u201ccomment or speculate on possible policy actions, or discuss what might be under consideration,\u201d said Jack Aubry, a spokesman.<\/p>\n<p style=\"text-align: justify;\"><strong>Treading Cautiously<\/strong><br \/>\nMorneau declined to comment on the matter Wednesday. \u201cWe have a housing market that\u2019s different in different parts of the country, so we need to carefully understand how best to deal with that,\u201d he told reporters.<br \/>\nOverstepping could prove costly. Housing has been one of the few bright spots in an economy struggling with falling oil prices and slumping business investment. Canada has $1.3 trillion in residential mortgage credit outstanding, according to Bank of Canada data, and real estate-related activity \u2014 including the imputed value of owning a home \u2014 represents about 15% of the nation\u2019s gross domestic product.<br \/>\nSome argue the market should be left alone. \u201cWe have a supply shortage in our two major cities,\u201d Phil Soper, chief executive officer of Royal LePage, Canada\u2019s largest real estate firm, said by telephone. \u201cThat problem will rectify itself.\u201d<\/p>\n<p style=\"text-align: justify;\"><strong>Industry Resistance<\/strong><br \/>\nTightening regulations also isn\u2019t fair to first-time home buyers, according to Kevin Lee, Chief Executive Officer of the Canadian Home Builders\u2019 Association. In an interview last month in Bloomberg\u2019s Ottawa office, Lee said the newly-elected Liberal government should reverse steps taken in recent years to tighten the market. That would also be more consistent with their pledge to help middle class families, he said.<br \/>\n\u201cHome ownership is a big portion of the financial well- being of the middle class,\u201d Lee said.<br \/>\nIn the end, the market may regulate itself. If the US Federal Reserve increases interest rates this month, as expected, yields in Canada will follow, and so will mortgage rates, making home ownership more expensive. The Bank of Canada 5-Year Conventional Mortgage Rate, a compilation of rates offered by chartered banks, is 4.64%, the lowest in decades.<br \/>\nThe Fed \u201cliftoff\u201d would mean \u201cmortgages will be more expensive and that will reduce the number of people that will qualify,\u201d Sherry Cooper, chief economist at Dominion Lending Centres, said in a telephone interview. Asked if the Finance department will crack down on mortgages, she said \u201cI don\u2019t think they will and I certainly hope they don\u2019t.\u201d<\/p>\n<p><a href=\"http:\/\/business.financialpost.com\/personal-finance\/mortgages-real-estate\/canada-faces-house-price-dilemma-in-push-to-tighten-mortgages\" target=\"_blank\">Canada Faces House-Price Dilemma in Push to Tighten Mortgages<\/a> by Katia Dmitrieva, Theophilos Argitis &amp; Greg Quinn | Bloomberg News | Financial Post<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canada\u2019s Finance Minister Bill Morneau faces a delicate decision on housing as his own officials push for tighter mortgage rules to cool Toronto and Vancouver real estate. The finance department &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2015\/12\/canada-faces-house-price-dilemma-in-push-to-tighten-mortgages\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-294","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Canada Faces House-Price Dilemma in Push to Tighten Mortgages &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2015\/12\/canada-faces-house-price-dilemma-in-push-to-tighten-mortgages\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Canada Faces House-Price Dilemma in Push to Tighten Mortgages &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Canada\u2019s Finance Minister Bill Morneau faces a delicate decision on housing as his own officials push for tighter mortgage rules to cool Toronto and Vancouver real estate. 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