New mortgage rules did not cool down the market
It was interesting to see that after the Feb 15 announcement regarding changes to the down payment required for properties above 500K, the government expected that the housing market would cool down. Quite the opposite is happening.
I spoke with realtors and they stated that clients selling properties below the 500K value are attracting more buyers than before. One listing agent even said for a property in Ajax selling for 430K - single detached, 1500 sq ft size, getting 17 offers above asking is not really heard off.
The buyers who can afford the 500K plus properties and who does not have sufficient down payment under the new rules are being forced to look for a lower priced property. within their downpayment reach. You can also read more about this topic from the link shown below.
Foreign entities investing in the housing market.
An intersting article came about regarding the influx of foreign money into the housing market by CBC.http://www.cbc.ca/news/business/housing-market-regulations-1.3479818.
I am for regulating the market to foreign money for the following points:
The demand for housing is not related to dweling requirement but on investment requirement forcing the prices to go up; common Canadians would not be able to afford these prices resorting to renting and other non-permanent means of dwelling
Income from investment properties held by foreign entities are very unlikely invested back into Canada. There is a potential that the revenues generated leave the country - we have no laws to prevent this
As more foreign funds come into the housing market, sustainability of the whole market is now in the hands of entities who may chose to abandon or sell their investments. This will affect the whole market as people who opted to buy the property at a higher cost after saving their hard earned money would suffer from a devaluated house price.
Banks would be unclear as to the direction of these investment properties - they would not have any solid indicator if a default is emminent.
The idea of building house for local consumption or local use should be the priority and should be the focus of the housing market. If there is a large portion of houses owned by foreign entities being used to leverage on a quick and short term profit, it is then no different from the stock market where the later would have regulations on how a sale was done - on properties , you can dispose an asset when you want to. This is not sustainable in the long run.
HSBC clamping down on mortgages for Chinese in the US
Interesting article posted in the web on how HSBC is limiting mortgages for Chinese nationals investing in real estate in the US. See link: http://www.ntnews.com.au/news/breaking-news/hsbc-curbs-mortgage-to-chinese-in-us/news-story/bdceb8723e0bb5ee64e94544e2642f80
In my previous blog, I did state that foreign money flooding the Vancouver and Toronto real estate market is causing the overheated market pricing. An artificial demand for homes drives the prices up and many of them are not even occupied.
Chinese nationals are looking for other conduits to park money as their own economy is not really doing well. Investments are being taken out of China and moved to the US and Canada.
Will the Canadian banks follow suit and curb foreign nationals from investing in the local canadian housing market? This is a decision the banks would have to make. If they do, the correction in pricing may happen as demand for high end properties would decline. This would create a ripple effect into the whole market. Let us wait and see.
I bet they will not. My own opinion based on what I know. You may disagree. Let us just wait and see.