The reasons for concern are not the same in each city. In Toronto, the main concern is that "the rise in house prices has not been matched by growth in personal disposable incomes" the CMHC said, adding there is evidence of overbuilding in the market, with a historically high level of unsold units.
Toronto's conditions have gotten worse since April, when the city was deemed to be at "moderate risk" of a slowdown.
His comments come in the wake of an admission by alternative mortgage lender Home Capital Group Inc. that it had cut ties with brokers and fired two underwriters after it uncovered evidence that some borrowers had been approved for insured mortgages with fake employment letters that overstated their incomes. Company officials said they are confident none of their employees was complicit in any fraud.
Like Home Trust, Toronto-based Equitable, which operates as Equitable Bank, uses mortgage brokers to target high-risk borrowers including self-employed workers and new immigrants, largely through uninsured mortgages offered at higher interest rates to compensate for the added risk.
It has been working to expand its reach into the business of insured mortgages to prime borrowers and said it originated $380-million worth of prime, insured mortgages in the second quarter, up from $191-million in the first quarter and nearly double the same period last year.
nothing will happen. A little bit of slowdown, perhaps.Take it from this 'old pro' who was there then.
Equitable Group combing through mortgage loans for possible fraud link
Liar loans, NINJA, subprime, yup...
Where were you from 89 to 2005/6?
You might be correct, but what wisdom have you learned as an "old pro" that says Canada is immune from anything other than a bit of a slowdown?
Equitable would be irresponsible if they had the same 45 mortgage brokers feeding them as well as Home Capital not to investigate.
I am sure there are more than 45...but given the size of the portfolios, I hardly think one can extrapolate that to conclude that the situation is rampant.
Migos, while I share your concern that prices have become stretched and I have no doubt there will be some reckoning, I do not anticipate a US style
correction. Of course the higher R/E goes, the more prices can fall.
I do believe one thing has happened though. Rightly or wrongly, it is my belief that with all the money that has been printed going into every asset class...
a lot has found its way into real estate and in Toronto and Vancouver. When the money is withdrawn from the system at some point...it will get ugly.
What I am not as sure of however, is will it come down more in Toronto and Vancouver, or will they survive better than other areas in the country because
foreigners and maybe locals believe the safest real estate market is Toronto (the financial center of the country) and Vancouver (proximity to Asia). In other words,
more of the "hot money" has been invested in TO and Vancouver to make money but as it slows will it come out in the same fashion?
I am not sure of the answer to this question. Thoughts anyone?
It's an interesting question. Foreign investors have already taken a 25% bath vs. if they held USD assets. The blood is already in the water. If anything, I could see further investing in Vancouver and Toronto condos as "hot money" flees the mess that is China and looks for safe haven elsewhere. Chinese seem to have an attitude around real estate that defies all basic investment fundamentals so I could see the bubble getting worse before it gets better.
Ultimately I think the downfall will be rising interest rates and overbuilding. Nobody is talking about the fact that all these condos that are "sold" are unoccupied. Once people actually move in, we will see if there are enough renters/buyers to gobble up the historic level of supply. Canada doesn't have much experience with the 5+ year cycle of condo construction vs. less than a year typically for low-rise.