Why is Ottawa picking on Vancouver?

According to the Vancouver Sun our market will be hit hardest by the new tighter mortgage rules for the CMHC:

The new rules will disproportionately affect first-time homebuyers and people who live in B.C., home to the country’s highest housing prices, said Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate.

“The sense is, there are more first-time buyers in the Lower Mainland who have been using the 35-year mortgage,” he said in a phone interview. “Either those people have to come up with a slightly higher down payment, or they just can’t bid the same price on a house.”

The longer amortization periods have become popular among Canadians since they were introduced.

As of November, 30 per cent of all new mortgages in Canada had a 35-year amortization period, according to the Canadian Association of Accredited Mortgage Professionals. While B.C. numbers are not available, that percentage is undoubtedly higher here, Somerville said.

Ottawa discontinued the 40-year mortgage amortization and the zero down payment in October 2008, two years after the controversial features were introduced. About six per cent of existing mortgages have a 40-year amortization.

Read the full article over at the Vancouver Sun website where they also have a collection of photos comparing what you can get across canada for the average Vancouver house price and maps of where you’ll most likely run into bedbugs in the Metro area.

208 Comments
newest
oldest most voted
Inline Feedbacks
View all comments

[…] RSS 2.0 comments feed. leave a response, or trackback from your own site. […]

patriotz

@grant:

"When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean — neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master – – that's all."

(Through the Looking Glass, Chapter 6)

Never more true than for "Rich Asians". It means whatever the speaker wants at any given time, thus it's impossible to have any objective discussion about "them".

Anon

@jesse: Cap rates vary with interest rates in a variety of ways. The simplest is that interest rates affect the value of the underlying. Do a simple principal component analysis and you will see that in fact they are the *main* factor in determining cap rates. Read for example the explanatory example in Wikipedia: http://en.wikipedia.org/wiki/Capitalization_rate
or even: http://www.incomeinvesthome.com/growth/reit/equit

Finally for a more rigorous discussion there is: http://dspace.mit.edu/bitstream/handle/1721.1/322

lurker

@Vanrod:

numbers from previous january's also contain sales from dec.

Lilypad

@bigbadbear1:How many Mercedes can $835,000 + interest over 30 years buy again?

grant

"I love that Landcor data that shows less than 1000 properties owned by “Rich Asians”."

Plenty of "rich asians" are also canadians. They're called 'immigrants' and perhaps they don't show up on landcor as foreign owners.

The fact is: there's foreign money buying vancouver real estate, but arguing about "how much" is idiocy since there's (so far) no statistics to measure it.

Lilypad

@Vanrod: You know not of which you speak, my friend.

VHB
Vanrod

@VHB: Wait till the month is over before you make such claims. Doing analysis now is useless, your putting too much stock on the first couple of weeks in the month (when delayed sales from the holidays were coming though, with new year listings at the same time)

With all your analysis skills you should figure this out. By the month end it will turn out to be a very normal january…mark my words!

VHB

Days elapsed so far 13

Days remaining 7

Average Sales this month 81

Average Listings this month 232

Projected sell/list 35.0%

SALES

Projected month end total 1622 +/- 109

95% Conf Interval lower bound 1513

95% Conf Interval upper bound 1730

NEW LISTINGS

Projected month end total 4632 +/- 189

95% Conf Interval lower bound 4443

95% Conf Interval upper bound 4821

MONTHS OF INVENTORY

Inventory as of January 20, 2011 10679

MoI at this sales pace 6.59

don't believe the hype about this being a 'regular' January cycle. A sell list of 35% is brutal. Sales are way below average. Listings are way above average.

jesse

@Anon: "For instance, his comments about being in a low interest rate environment causing cap rates on vancouver condos to look attractive seem spot on" Why? You think cap rates vary significantly with interest rates? Maybe if you're financing for 60 years. The same logic was used in the US and it ended in tears; those who bought when prices were high got stuck with a huge capital loss; many of those with the best of intentions won't regain their capital before they have to sell (prices are still dropping there BTW). That 4% cap rate gets cleaned out for a net loss. Dave states "My overall point is that low cap rates in real estate are a function of being in a low return economic environment." I'm sorry but that's not backed up by experience in any time period.… Read more »

Best place on meth

@Anon:

No, I read all of Dave's posts (foolishly) and simply conclude after each one that's he's completely full of shit.

The numbers he throws out don't even make sense and he doesn't care to provide real examples of how he comes up with them.

Anon

I think people are blindly voting down Dave's posts because of who he is (or supposed to be) rather than the content of his posts. For instance, his comments about being in a low interest rate environment causing cap rates on vancouver condos to look attractive seem spot on, even to me (and I'm a huge Vancouver RE bear!) There are few alternatives offering more return, and each *seem* much more risky than real estate (again, perception is reality in the Bayes framework). So the average person looks around, and says, "I can either put my 500K in the bank or in a GIC and get 1.5to 3.5%, or I can buy a cool swanky downtown condo and get 3.5-4% (plus bragging rights at cocktail parties). This will changes as the global economy improves, stock markets start generating better returns,… Read more »

4SlicesofCheese

@Best place on meth

Better hurry I heard from and agents agent that there is only one 888 sq ft unit left for presale. Although there could be some released later on magically.*

*Note I have no idea if this is true out or not but my agents agent would never lie to me.

Best place on meth

@4SlicesofCheese:

Those are some fine looking suites at Uptown although the 588 sq. ft one bedroom is a tad small.

The 788 sq. ft. 2 bedroom is much nicer and the 888 sq. ft. 2 bed + flex is out of this world.

sluggo

nice numbers baulb.

Don't recall so many listings so early in the year in previous years. Looks like we could be in for a helluva spring.

oneangryslav2

@IT__Pro: French likes to spam fake daily stats, for whatever reason.

Boombust

"Indeed very strong legs, cheers."

More like an IRA kneecapping.

4SlicesofCheese

@Renting

You were talking about the Rich Asian Overseas Buyer Myth?

I thought you were talking about the Rich Asian Immigrant Myth.

Either way, these myths will not stop the coming correction.

Prca

@french:

New Listings 247

Price Changes 36

Sold Listings 79

Indeed very strong legs, cheers.

paulb.

New Listings 247

Price Changes 36

Sold Listings 79

10679

🙂

IT__Pro

@french:

You're joking right? You're using a 63 sale day as evidence that this market still has legs and that people a rushing in before the 30 year??

Renting

To be fair I did receive a hilarious email today from Concord about their Chinese New year sales.

Yes, and I assume you are not a Rich overseas based Chinese.

We know there are lots of Chinese born residents in Metro Vancouver who are buying just like every other race living here. They always have. What the realtors are pumping is Rich people coming in from China to buy cash in hand. It ain't happening. If it was they wouldn't be spamming people like you.

Concord will probably have a St Patricks day promo too. Doesn't mean the Irish are buying.

bigbadbear1

Re: 4slicesofCheese – I recieved something similar with a devlopment in North Delta:

The price of the home is listed at $206,800 – however given our current Chinese New Year promotion, you can receive a discount of $6,800 off of the price. $200,000 for a 650 sq.ft Delta side condo with: underground parking, stainless steel appliances and granite throughout is an incredible deal for, especially for such a unique location. We currently have only 2 of these homes left at this amazing price point.

N