If the past few months are any indication of things to come, it seems as though growth in the Canadian housing market is finally losing a bit of steam. For those who are looking to sell their homes, now may not necessarily be the best time. For those looking to buy a property, however, we could be headed towards a friendlier market. While sellers will certainly pout and say that it isn’t fair, it’s only because timing isn’t on their side. The Canadian housing market has been a seller’s market for as long as anyone can remember; until this year, it’s been difficult to imagine anything else.
A big debate between government and banks – and any company tied to selling mortgages – has arisen over how carefully regulated the mortgage process should be. In Ottawa, for example, the amortization period for a mortgage was reduced from thirty-five years to thirty years and then recently to twenty-five years. While a ten year change in the policy may seem extreme, the reader should also take into account the fact that twenty-five years is already a rather generous window in which an individual may pay off a debt. Our society may have been built on faith in credit, but that doesn’t mean there shouldn’t be policies in place to protect people from making unwise decisions or to prevent banks from taking advantage. As we saw in the 2008 mortgage crisis (the reverberations of which are still being felt across the globe), markets and general and housing markets especially, need to be reined in at times to prevent an over-extension of faith in credit. While this view will certainly make libertarians and hardline capitalists grumble, it is in check with the socialist leanings of the Canadian government, which aims to protect the financial well being of its citizens.
With regards to the effect that this will have on the real estate industry as a whole, we’re still waiting to see. Some real estate agents may do well to seek out low rates for real estate commissions on their next few sales in order to maintain a positive cash-flow while the further implications sort themselves out. For some people looking to sell their homes, now will be a time to sit tight and see if the market regains its previous momentum. Other home-owners may not have the luxury to sit tight, may need to liquidize their assets hastily and in these types of scenarios you can bet there will be buyers lined up down the block to take advantage of the overdue cooling.
The House of Commons finance committee has recommended that the government provide increased support for first-time house buyers, but finance minister Bill Morneau is dubious of this plan of action. He explains that the new regulations are reducing the number of insured housing loans being issued to indebted individuals, thus increasing the quality of credit in the mortgages that are processed. The idea is that providing an environment where insured mortgages are issued to citizens with poor credit that may be paid back over a huge window will ultimately have a negative impact on the housing market and on the affordability of housing to your average Canadian.