Can we fix affordability with more debt?

Most people agree that there’s a problem with the BC real estate market, and that problem is usually called ‘affordability’.

Affordability usually means what you’re buying is too expensive, but it can also mean that you just can’t afford the monthly payment.

Interest rates look at risk of rising, but have been at rock bottom levels for years.  That means there’s not much room to move on ‘affordability’ when it comes to interest rates.

So we’re stuck with two options: price comes down or government starts giving away money.

Important announcement” for first time home buyers from the BC government.

Daily Hive says they know what this announcement will be.

Update: They were correct, here are some details:

The B.C. Home Owner Mortgage and Equity Partnership program will provide a maximum of  $37,500 — or up to 5 per cent of the purchase price — with a 25-year loan that is interest-free and payment-free for the first five years.

“The dream of home ownership must remain in the grasp of the middle class here in British Columbia,” said Premier Christy Clark.

The intention of the program is to assist people who can afford the mortgage payments on a new home but are challenged to make the down payment.

The province will start accepting applications for the program on Jan. 16, 2017.

Homebuyers will pay no monthly interest or principal payments over the first five years as long as the home remains their principal residence.

After the first five years, homebuyers begin making monthly payments at current interest rates.

If too much debt got us into this problem, surely it can get us out of it right?

Meanwhile the Bank of Canada is warning again about huge mortgages and growing household debt.

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dyugle
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dyugle

Does CMHC accept a borrowed DP?

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Oracle
Guest
Oracle

Here is the reason they brought in the 5% BC partnership program:

I for one can’t even figure out any conspiracy theory on what benefit it would bring! Millennials who buy obviously have help from parents and most parents wouldn’t want their kids to buy in an uncertain market.

The only people I’m hearing that are buying are those priced out of rentals and those PR that continue to funnel foreign money in. Foreign students are buying but they are doing it through proxies. proxies are risky so thats why they are buying condos. Thats why there are still bidding wars there.

fomostyle
Guest
fomostyle

Electioneering.

Newcomer
Member
Newcomer
fomostyle
Guest
fomostyle

http://www.aljazeera.com/indepth/features/2016/09/zealand-relentless-housing-crisis-160928153415463.html

^ where we are headed (except without the social infrastructure NZ seems to have put in place.). Their avg house price not nearly as high as ours in Vancouver. BTW, 42,000 homeless in a country of that size. Ugh. Shameful.

Oracle
Guest
Oracle

5% of Vancouver population will be homeless within 10 years. Just like Shanghai and New Delhi.

The residents of New Delhi and Shanghai don’t bat an eyelash when they see a starving homeless family.

People won’t even in Vancouver soon. Most will feel superior and want the new status quo. The crooked will exploit these people. Men women and children.

fomostyle
Guest
fomostyle

And are you for or against that?

southseacompany
Member
southseacompany

“B.C. to offer loans to first-time buyers as BoC issues debt warning”, Globe & Mail
http://www.theglobeandmail.com/news/british-columbia/bc-offers-interest-free-down-payment-loans-to-first-time-buyers/article33335499/

“Joshua Gottlieb, an assistant professor at the University of B.C.’s Vancouver School of Economics, said the new loans are asking people to stretch themselves even further to achieve home ownership, a risky proposition if interest rates increase significantly in the future.”
“He called the policy a counterproductive taxpayer-funded subsidy for homeowners and developers. The roughly 15,000 new buyers a year the government estimates will take advantage of the new loans will hurt affordability further in a market constrained by a lack of supply, he said.””

southseacompany
Member
southseacompany

“B.C. first-time homebuyers loan program sparks debate, concern”, Vancouver Sun
http://vancouversun.com/news/local-news/b-c-government-offers-down-payment-loans-to-first-time-homebuyers

““I hate it. To be very clear, I think it’s really bad economics,” said Tom Davidoff of the University of B.C.’s Sauder School of Business. ”

““Big picture, it’s a step in the wrong direction. We have too much demand chasing too little supply.””

““They’re trying to cool down the housing markets, and now you have Christy Clark trying to give people extra gas (for the fire),” Somerville said.”

YVR
Guest
YVR

It seems this interest free loan scheme is less popular than the HST. Pretty much everyone seems to hate it. I say this one costs the BC Liberals lots of votes in the next election. People hate this because it is not only counter productive to increasing affordability but it is voters money subsidising the interest free loans. The link to helping developers is blatant. I hope the NDP has the balls to promise to halt the program if elected.

southseacompany
Member
southseacompany

Meanwhile;

“The new loan program was greeted with praise by developers, the real estate industry, mortgage brokers and some housing analysts who argued it will help those who would already qualify for mortgages speed their entry into the market.’

Lurker
Guest
Lurker

Some serious bear spray today.

bullwhip29
Guest
bullwhip29

‘Terrible policy’: B.C. housing incentives widely panned by experts
http://globalnews.ca/news/3130685/terrible-policy-b-c-housing-incentives-widely-panned-by-experts/

paulb
Member

New
63
Price Change
12
Sold
73
TI:8027

http://www.paulboenisch.com

bullwhip29
Guest
bullwhip29

MacLeans: B.C.’s free loans to homebuyers won’t buy much in Vancouver
B.C.’s plan to give new homebuyers interest-free loans is a terrible idea that will only worsen Vancouver’s housing bubble
http://www.macleans.ca/economy/economicanalysis/bcs-free-loans-to-homebuyers-wont-buy-much-in-vancouver/

bullwhip29
Guest
bullwhip29

Property assessment hikes prompt calls for change to homeowners’ grant
http://bc.ctvnews.ca/property-assessment-hikes-prompt-calls-for-change-to-homeowners-grant-1.3205863

Laibach
Member
Laibach

Kinda makes sense…

Vancouver is the ‘rattiest’ city in B.C.

http://www.640toronto.com/syn/112/254041/vancouver-is-the-rattiest-city-in-b-c

Best place on meth
Guest
Best place on meth

All of the industry whores who were screaming bloody murder about government intervention in the free market after the foreign buyer tax have suddenly fallen silent.

Oracle
Guest
Oracle

7K party!

And Christy’s bullish announcement giving $37,500 free for 5 years!

————-

I think April is going to be one hell of a month for real estate. By then, another 40,000+ people will have moved into metro Vancouver since July’s foreign buyers tax.

Only 100 days or so away.

I’m thinking prices resume upward trajectory.

Newcomer
Member
Newcomer

That’s a shock. You’ve always been such a bear.

Oracle
Guest
Oracle

Just goes to show that governments elected have dictorial powers these days.

Who knows, they can even pass a law stating the death penalty to any person who’s online name begins with “N”.

Don’t kid yourself, we are well on our way there.

Chinabuyeverything
Guest
Chinabuyeverything

“My research shows it’s only B.C. that allows foreigners to donate to political parties,” Travis said. “I have not found anywhere else in the Western world where that happens.”

http://vancouversun.com/storyline/how-much-does-the-real-estate-industry-influence-b-c-politicians

xyz
Guest
xyz

It’s all Putin’s fault.

oopswediditagain
Guest
oopswediditagain

The program is also designed to stay under the 20% cap so that CMHC insurance covers the mortgage. In other words if the home is $200,000 and you wanted to put down $35,000. they would give you $4980. to stay under the cap.

https://homeownerservices.bchousing.org/housing-assistance/bc-home-partnership/bc-home-partnership-calculator.html

I’m honestly not convinced that this program is going to goose the market. They are catering to the lowest denominator in terms of credit worthiness and/or financial literacy. They still have to qualify for the mortgage.

The exceptions are fewer when the home ownership rates are at historic levels. If you couldn’t buy with the stimulus measures over the last 10 yrs. perhaps there’s a good reason why you are renting/living with mom and dad or ????

Hyper-mega-Bull
Member
Hyper-mega-Bull

so funny. people who don’t pay canadian tax drive up housing prices.

the solution is to take money from tax payers and give it back to them to help them compete.

and the all dummies will fall for it and vote for her!

welcome to canada!

fomostyle
Guest
fomostyle

True. And sad.

Oracle
Guest
Oracle

Only until they have to sell their daughters and wives to pay for living. Then it will be too late to protest.

Newcomer
Member
Newcomer

Yes, that’s quite likely. Glad to see you are not letting yourself get carried away.

Oracle
Guest
Oracle

Girls already are. Exploited by foreign worker employers, landlords who want favours, etc.

It’s happening already. But keep your rose colored glasses on.

bullwhip29
Guest
bullwhip29

B.C.’s interest-free loan to homebuyers offers much risk, few rewards: economists
http://www.metronews.ca/news/vancouver/2016/12/15/bcs-interest-free-loan-to-homebuyers-offers-much-risk-few-reward.html

southseacompany
Member
southseacompany

““In the US, in the subprime market, those loans were really bad because by the time you were trying to find anybody who would qualify, the last people you found to qualify were really lousy risks.””

Frightening.

bullwhip29
Guest
bullwhip29
bullwhip29
Guest
bullwhip29
southseacompany
Member
southseacompany

“‘It really does look like Vancouver’s housing bubble has burst'”, Business Insider
http://www.businessinsider.com/vancouver-housing-bubble-burst-2016-12

“Home prices in Vancouver have dropped for the second month in a row, declining by 1.3% month-over-month in November, according to the Teranet-National Bank Composite House Price Index. The two months of dips follow 21 consecutive months of price increases.

“It really does look like Vancouver’s housing bubble has burst,” David Madani, a senior Canada economist at Capital Economics, wrote in a note.”

kabloona
Member
kabloona
Garth’s take: http://www.greaterfool.ca/2016/12/15/what-can-go-wrong-4/ “You can’t buy a banana in Toronto without six bits in your pocket, but soon you’ll score a $750,000 house in Kelowna, or Langley, or Nanaimo, without a penny in cash. Yes, kids, 0% down is back – just in time to help keep properties from becoming affordable. Once again, government sucks. Then it blows. Here’s the latest: staring at a looming election, BC’s ruling party has decided to play the real estate card. Again. After bringing in the Chinese Dudes tax, presiding over a sales collapse and a price rout, taking over the real estate industry, then allowing the vacant-condo levy in Vancouver, the Christy Clark government is about to give financially-retarded moisters free down payments. Yes. Zero down….. …..As we all know by now, BC is obsessed with real estate. It’s a world-class fetish. The… Read more »
Just me
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Just me
This move my save a significant amount on CMHC insurance for some people. If you don’t believe me, see this comment that just appeared on the internet: As a mortgage planner that specializes with First Time Buyers, this will be an excellent way to save the CMHC/Genworth/Canada Guaranty premiums and put more money into their pockets or use to payback the zero interest loan. However, Mortgages, like RRSP’s or investments should be professionally managed. Example: $350k purchase at 5% ($17500) downpayment is $11,970 in insurer premiums (built into mortgage) w/ $1575 per month @2.69% rate. With the “zero %” loan for the additional $17500 downpayment; will reduce the insurer premium from $11970 to $7560 for a $4410 savings there and further reduce monthly payments to $1475 per month; another $6,000 savings to client or to repay the zero % loan.… Read more »