Baby, we got a bubble!?

[Eug]

15% / 25 yr is too harsh a change IMO.

 

[simuls]

Just knock it down to a max amortization of 25 years and be done with it. Leave the 5% alone with a caveat that at anything less than 15% dp you must lock into a 5 year rate.

 

[The Condo Observer]

Great ideas here! Lots of options to manipulate D/P and Amortization Periods to suit. Hope someone who makes these policy decisions is listening. I am all for bubble-proofing the system.

Also, terms can be different and specifically tailored for the following categories:

First Time Owners
Trade-Up Buyers
Investors buying Property No 2, 3....etc. -


I am tempted to add the third investor group should have the highest downpayment, but also allowed longer amortization periods, because this investor group is actually contributing to the new rental stock of condos in the city, and provide an important product-service. At the same time, I think the overzealous investor group adds to the bubble-hype, with the fifteen day lineups, hijacking of opening events etc.....

 

[Eug]

Actually, I'd be perfectly happy with 10%, while leaving the 35 year amortization period intact.

A jump from 5% to 10% is actually quite a big deal.

Or if Mark Carney was really serious about preventing a bubble, he'd just start to increase the interest rate.

 

[interested]

[

Or if Mark Carney was really serious about preventing a bubble, he'd just start to increase the interest rate.[/QUOTE]

Unfortunately serious or not Mark Carney has other concerns besides the real estate market, for eg. hi unemployment, deficits, and the fact that the economy is still weak and fragile and he cannot risk these just to prevent a possible or real real estate bubble.

That said, I wholeheartedly agree with the last few posts that these close to zero money down and prolonged amortization periods do present a significant risk. Removing these would surely decrease demand and hopefully let the air out of any bubble slowly rather than risking a big "pop"

 

[MAU]

15% / 25 yr is too harsh a change IMO.

Agreed. This jump is too big from where we are now.

I think either 10% or a 30 yr change is likely. I'm just wondering if they'll have the balls to do both.

 

[Eug]

Agreed. This jump is too big from where we are now.

I think either 10% or a 30 yr change is likely. I'm just wondering if they'll have the balls to do both.

I hope not. Maybe eventually, but not all at once. To do both would be a severe blow.

Unfortunately serious or not Mark Carney has other concerns besides the real estate market, for eg. hi unemployment, deficits, and the fact that the economy is still weak and fragile and he cannot risk these just to prevent a possible or real real estate bubble.

That said, I wholeheartedly agree with the last few posts that these close to zero money down and prolonged amortization periods do present a significant risk. Removing these would surely decrease demand and hopefully let the air out of any bubble slowly rather than risking a big "pop"

Agreed. However, my interest rate comment was not to start with huge increases in interest rates.

I was thinking along the lines of say a 0.5% rate earlier rather than later, rather than just continuing to keep things at 0.25%. Mind you, I suppose it's possible that it would just get people more into buying mode, to avoid the inevitable increase to well beyond 1%. The argument against that risk though is I say people are already in that avoid-the-interest-rate-increase buying mode, and that's why were are talking about a potential bubble coming in the first place.

 

[EXgeMMy]

IMO, a big jump to say 30yrs/10% down or even 25/15 is not a bad idea.

In the early 90's I believe Hong Kong over night implemented a 30% down payment rule to control the real estate bubble.

That brought things quickly to a hault.

Of course their prices are crazy right now.

 

[Eug]

IMO, a big jump to say 30yrs/10% down or even 25/15 is not a bad idea.

25-year/15% would decimate the market.

I'm not sure the best way to prevent a bubble is to cause a crash. A slower more gradual approach would be more prudent.

Not that the gov't would consider 25/15. It'd be a sure way to get them kicked out in the next election.

In the early 90's I believe Hong Kong over night implemented a 30% down payment rule to control the real estate bubble.

That brought things quickly to a hault.

Indeed. However, wasn't that just for luxury properties? Cuz if so, it's actually 40% now.

 

[interested]

25-year/15% would decimate the market.

I'm not sure the best way to prevent a bubble is to cause a crash. A slower more gradual approach would be more prudent.

Not that the gov't would consider 25/15. It'd be a sure way to get them kicked out in the next election.


Indeed. However, wasn't that just for luxury properties? Cuz if so, it's actually 40% now.

I agree with Eug in this matter that a slower more gradual approach would be more prudent. that said, I doubt whatever the government did would result in them getting kicked out or not gettting kicked out. Housing is important but I suspect jobs, employment rates, interest rate hikes etc. weigh more than an individual housing limit on either term of mortgage or downpayment.
Less people affected by the housing entry levels than by the other factors quoted I believe.

The trouble is how do developers know who are investors vs. end users. For eg., what is to prevent me from saying I am purchasing a unit for my adult child and then "change my mind". It will be difficult to have different limits for investors/end users that are effective.

 

[simuls]

I think it would be prudent for purchasers to have to list their intention with the property. Not for any sort of penalization, but just for information's sake. On the offer to purchase, just tick a box of personal use/investment and then the builder must report this to the government as part of their sales tally. This way, the government and the public would have an approximate tally of how many units are for investment's sake. It would not only help prevent a bubble, but be of serious use to investors who might be jumping into a market like this when, according to my anecdotal but pretty thorough evidence, almost 60-70% of all new units bought since August in launches like X2, 3 projects in Liberty Village, ICE2, etc. are investor owned. If investors had this info they could determine whether the price is artificially inflated and whether demographic change supports such a large influx of rental units. It would also give end user purchasers the ability to determine whether this is a good time to buy. I have never understood why builders don't collect this information. Even if the intended use changes over the construction timeline, it would still be a lot more information than what we currently have.

 

[EXgeMMy]

when i signed on a unit at West harbour City before I pulled out they did ask if we were going to live there or rent it out.

Our agent advised us that the answer is always to live there.

 

[Eug]

when i signed on a unit at West harbour City before I pulled out they did ask if we were going to live there or rent it out.

Our agent advised us that the answer is always to live there.

Yep. Even though it is perfectly legal to rent it out, people often look at you differently if you do that. "Investors" who buy simply to rent out have a very bad reputation, sometimes justified, sometimes not.

 

[interested]

when i signed on a unit at West harbour City before I pulled out they did ask if we were going to live there or rent it out.

Our agent advised us that the answer is always to live there.

some builders request more down payment from investors, hence I suspect your agent advised to say you live there.

 

[interested]

Yep. Even though it is perfectly legal to rent it out, people often look at you differently if you do that. "Investors" who buy simply to rent out have a very bad reputation, sometimes justified, sometimes not.

I find this an interesting comment. I say this as developers and real estate representatives rely on the sale to investors to get the buildings going. It is often easier to sell to an investor since the investor usually knows what he/she wants and presumably divorces emotions more than a buyer who may tend to be alot for finicky since it is a place they will live in. More work I would think for the agent selling the property.