Ottawa ramps back CMHC mortgages

Anybody remember 1999? Back then the CMHC would only insure mortgages for a maximum of 25 years. Then the Canadian government decided the housing market would be a great way to goose the economy since it was working so fantastically in the US. In 2005 the max amortization went to 30 years, in 2006 to 35 and in 2007 we saw the introduction of 40 year terms with zero down to compete with private companies like AIG and Genworth.

Now there are worries about the debt load of the Canadian consumer and the government is trying to slowly take away the juice without causing a mess. Last year we saw the 40 year term vanish and go to 35. Now we have the most recent round of changes.

..new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.

Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.

Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.

You can find some interesting analysis of what these changes mean in our forums. What effect do you think this will have on the Vancouver market. Would our home prices be where they are today if there never where government insured 40 year zero down mortgages? Can this end well?

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[…] at vancouvercondo.info January 17th, 2011 at 7:51 pm – “My brother and his wife must be sweating now! They have their owner-occupied house, […]

anonymous23
anonymous23
9 years ago

Devore: It’s not different here. Asian buyers have failed to save every market that has declined anywhere in the world, including right here in Vancouver.

———-

In 2008, the financial crisis hit everyone including BRIC countries. Amidst uncertainties in the global financial system, you can't expect rich Asians to continue the buying binge. When the dust settled, the buying continued.

anonymous23
anonymous23
9 years ago

For the geographically challenged, India is part of Asia. So rich asian immigrants also include Indians.

Devore
Devore
9 years ago

@Troll: So if rich asians stop buying on weakness again, and likely start selling on prolonged weakness or troubles back home, how will they keep the market propped up? They won't. Prices have gone up across LM through to 2008, they dropped across LM in 2008, and picked up again through to end of 2010. Unless these rich asians are uniformly spread throughout LM, why are we even talking about them? They seem to behave like any other herd buyer: pile in when things are looking up, rush for the exits when doodoo is hitting the fan. You are also not talking about why all of a sudden mainland Chinese are coming here in droves buying with cash, and not so much in the past (when Hong Kong ruled, amongst others). When the situation in China changes again, what will… Read more »

real_professional
9 years ago

@ Jeff You are naive – Yes, assets should go up over the long run. Good for you for understanding that, it's called inflation. But tell that to the guy that bought stocks at the top of the market in 1999 and then again in 2008. Things are over valued and they will correct – buy now and lose 100k or wait to buy and then not wait 10 years for the price to break even. These are the options before you. . . My father in law ran up to me once with an article from the vancouver sun that said "Housing prices should double over the next 20 years" … he handed it to me like he was saying, "I told you so" … so i told him that works out to a 3.5% rate of return per… Read more »

Anonymouse
Anonymouse
9 years ago

@D. Rail:

"Another comment from the terminally gullible!"

It may have escaped your attention but it appears the person that this story was about didn't actually buy the property. So if it was a sales tactic, it didn't exactly work did it? And I'm sure it wouldn't work in general, either. You don't close a sale by artificially increasing the price to the buyer. The gullible one is the one who believes such nonsense.

itwillneverpop
itwillneverpop
9 years ago

let's start buying.

Jeff
Jeff
9 years ago

Prices will only go up over time. This mortgage rule change will have no impact on prices. And everyone here is completely wasting their time.

N
N
9 years ago

@Westside:

Nobody in Vancouver knows less than three real eastate agents personally. You can't turn around without bumping into them.

jesse
9 years ago

@TIME MACHINE: "What is amazing is the number of Vancouverites who appear to have fallen for them"

Let's be honest — most don't need much convincing. Realtors are just telling people what they want to hear. Sales 101. Good on 'em for being good salesmen with no souls 😉

D. Rail
D. Rail
9 years ago

@Anonymouse:

…….Give it up? Because the argument that the agent would fabricate 3 competing offers defies any sort of logic or common sense………

Another comment from the terminally gullible!

TIME MACHINE
TIME MACHINE
9 years ago

"Rich Asian buyers" is not just xenophobic but also dreadfully unimaginative. I'm sure that if India instead of China was being heralded as the Next Great Economic Superpower, we would be hearing about all the rich Indians buying in Southlands. Don't you know? They like it there, because it reminds them of their farms in the Punjab.

TIME MACHINE
TIME MACHINE
9 years ago

Can people really not see that the "rich Asian buyers" crap is just a recklessly xenophobic play on one of the most basic sales tactics of all time, namely, creating a sense of scarcity? Think about it. Whether you're selling Beanie Babies, timeshares or tulip bulbs, they sell much better now when people believe there will be less selection and higher prices tomorrow because everyone else is buying and there is limited supply. If salespeople employ this tactic to sell $5 plush dolls, and people fall for it there, why is it so hard to believe that they employ it to sell $1m bungalows? In fact, "rich Asian buyers", "we're running out of land", "be now or be priced out forever", "everyone wants to live here", etc. are all fairly unimaginative variations on some pretty basic sales tactics and slogans.… Read more »

Woodrow
Woodrow
9 years ago

Settle down on the numbers. January is a weird month, you always see a surge in the last week as things get back to normal. By the time Feb 1 rolls around there is a good chance sales and sell/list will be right in the average range.

jesse
9 years ago

@Troll: "You’re a fool if you think that offshore money isn’t a factor in certain markets. The question is how much. What we know is that there are lots of anecdotes that it is significant, and that prices in those areas are also strong." It's interesting this blog concentrates so much on the west side of Vancouver when it makes such a small part of the market in terms of sales. It should be self evident the west side is desirable, n'est ce pas? The main problem I have with "rich Asian money" propping up the market is that locals are buying right along side (and in way larger proportions than) this supposed endless tap of foreign-raised capital. If locals are unwilling or unable to buy, what happens to markets outside of Vancouver city and its immediate suburbs? I'm skeptical… Read more »

Anonymous
Anonymous
9 years ago

@real_professional:

Rejoice RP, the numbers are legit. lol

Troll
Troll
9 years ago

@Renting:

Where were the rich chinese in 2008 when the market tanked 20% in Van West?

That's some weakass logic. Are you suggesting that because they had money they should have continued buying into a falling market when everyone was panicked that we were heading into a new depression? Why is not conceivable that they sat on the sidelines during 2008 as things looked grim and then began to pile back in again in 2009 as the market picked up steam? Are you suggesting that Rich Asians don't have the same human emotions of greed and fear as the rest of the population? Now, that's approaching mythlike. But I guess that interpretation would get in the way of a good bear story. Although bearish stories always sound smarter, they're not always right. DEAL WITH IT.

Anonymouse
Anonymouse
9 years ago

@Best place on meth:

"Losing the sale? But I thought they had 10 more of these dumbasses lined up around the corner begging to buy it. Give it up already."

Give it up? Because the argument that the agent would fabricate 3 competing offers defies any sort of logic or common sense, and you'd rather nobody shattered your bear fantasies?

D. Rail
D. Rail
9 years ago

@Renting:

…..It is Sales 101. ……..

Actually, it's not even Sales 101: it's a prerequisite for Sales 101. The only people that don’t know that are those that have never sold, OR those that have never bought. There’s a sucker born every day!

Flip Flop
Flip Flop
9 years ago

Are there any detached houses for sale in Vancouver West?

Anything that's been on the market for more than 30 days with a reasonable comp?

Seems to me, if there were, that may be reasonable evidence that rich chinamen aren't lining up around the block to buy. And what do they have against N/W Van? That postal code just not up to snuff?

Gotta love those numbers coming out. Here's hoping it's not another disappointing year of flat prices.

4()4()4()4
4()4()4()4
9 years ago

Another day another sign the UBC crowd set the curse in motion. Today 4 deals fell through, all contained 4's in the address.

The curse will last 44 years in China and Canada.

Renting
Renting
9 years ago

In the interior, where houses have meters, grow op owners just connect a big electric cable to bypass the meter

Smart meter detect theft and send signals back to Hydro. It should put the mom and pop grow op mortgage helpers out of business. The organized crime large scale ones will figure something out. That may mean moving out of province though.

Another prick in the bubble. And grow ops were around long before this recent bubble so this may take us even lower than prebubble pricing.

Renting
Renting
9 years ago

Troll:

Well, the market hasn’t declined in Van West.

Where were the rich chinese in 2008 when the market tanked 20% in Van West? It then recovered when interest rates dropped. Since rich chinese do need mortgages please explain:

1. Why it tanked 20% in 2008 with China still booming

2. Why it recovered after interest rates dropped which should have no impact on rich chinese as they do not need mortgages.

This would indicate Van West is not driven by people who do not need mortgages. Lower interest rates are what saved it. But lets not let the facts get in the way of a good story.

painted turtle
painted turtle
9 years ago

BC hydro meters:

In the interior, where houses have meters, grow op owners just connect a big electric cable to bypass the meter… with a risk the house will catch hire 🙁

24 farms, 54 000 plants, were discovered around Williams Lake, around October 2010. It is indeed a decent part of GDP!

Renting
Renting
9 years ago

What we know is that there are lots of anecdotes

And the source of every anecdote is a real estate shill or agent. The stories and myths are part of every bubble. This one is no different.