Is the mortgage stress test making Toronto’s housing crisis worse or is it the Low-Interest Rates? – June 10, 2019,
The Canadian housing market hasn’t crashed and if you’re a believer in government intervention, you could make the argument that the reason for the housing boom and its inability to crash revolves around the government making the right decisions to control it. But the real estate lobby as many people know has been pushing for looser laws and for an economy that favors their industry. Low-interest rates, CMHC, low down payments and condo projects getting approved left right and center are helping speculators to drive prices up.
Now, what scares the real estate lobby is if the market gets stagnant, mainly because stagnation makes not only hurts Realtor commissions, it also can have a negative effect on the psyche of mortgage buyers. Houses need to be maintained, there’s a growing labor shortage and homes typically need major maintenance, which homeowners usually figure out after they’ve moved into their homes. What separates Canada from the United States is that almost every Canadian province has a high cost of living, in America as an example there’s an exodus from major cities. People are leaving the State of Illinois, New York, and California to move to conservative States with lower costs of living. In Canada, if you’re in Ontario, you won’t gain many benefits moving to another Canadian province because the cost of living all over Canada is the same, later all we have equalization payments which fund government services, which ultimately equate to the size of government not shrinking.
What this means for Ontario is a ‘housing shortage’ that speculators would like to capitalize on. Now the reality is the stress tests are there because there really is no justification for interest rates in Canada to be so low, Canadians have an excellent track record of paying off debt, rising mortgage prices is a sign of prosperity and if current housing prices aren’t based on any MPAC mechanism (The Municipal Property Assessment Corporation) which most homeowners hate because it forces their property tax bills up, so if there’s government intervention into the housing market it’s clearly there for a reason.
What the stress test is doing is it’s making homeowners consider lowering their prices, because the reason most people aren’t qualifying is that the prices are inflated based on the BoC’s posted interest rates. The real estate lobby hates this because their sales are down, but if it weren’t for government interventions, as well as the government, preventing competition for the Real estate lobbies, their commissions which we all know that’s what this is about would be drastically lower. A realtor commission for a 1 million dollar home sold is a lot higher than it would be for $400,000 home sold. It’s all a bunch of nonsense, if homeowners aren’t willing to lower their prices, that’s their right, they simply have to wait for more people to get approved. But the Canadian housing market has been regulated from the very start, when it benefited the real estate lobby they said nothing, now that’s it’s benefiting the consumer they have a problem with it.
Nobody is forcing homeowners to sell their home, they can list their homes at whatever price they want, if fewer people are qualifying for mortgages, so be it, lower your prices or hold off for wage growth. The housing market in Canada isn’t based purely on market fundamentals and the truth is, the end result has been higher prices, now that the government has found a way to suppress price inflation, the vultures want to inflate the housing market some more. This is why I’ve said from the beginning that the Federal government should stay out of the housing market because now these lobbying groups are going to fight to destroy the Canadian economy even more.
Is the mortgage stress test making Toronto’s housing crisis worse? – TheTorontoStar
Interesting times ahead