Here’s a surprise – it turns out if you hand out $13 Million in loans to the general population to buy a product, the price of that product rises.
In this case the product is condos and the $13M comes courtesy of taxpayers and the BC liberal governments ‘BC Home Owner Mortgage and Equity Partnership’ program.
As it turns out though, not everyone things this is the smartest thing in the world. UBC economist Tom Davidoff sounds downright unenthusiastic:
The BC Liberals announced the program back in December, arguing it would help young families crack into the red-hot housing market.
But critics warned that financially stretched buyers would take on risk by essentially starting a second mortgage and that the infusion of cash could drive prices up.
Davidoff said that second case appears to be playing out, with people using the program now accounting for about five to 10 per cent of condo purchases.
“When there’s too many people chasing too few houses, pushing more people to get in on the action just seems like a really dumb idea.”
Condo sales have been driving the Metro Vancouver real estate market in recent months, and the average unit price now sits at about $655,000.
For the month of May, the Real Estate Board of Greater Vancouver found 95 per cent of all condos listed had sold, with prices up more than 17 per cent year over year.
Read the full article over at global news.