What’s The point of the CMHC? Not only are MORTGAGES prices soaring, renting a one-bedroom home in Halifax reached $1,574, and a two-bedroom, is now $2,041? – October 23, 2021,
Blah, blah, blah, the government wants to find a solution to a problem government created. The CMHC was designed to turn more renters into homebuyers, well, now that becoming a homebuyer is out of reach for most renters, rent prices are going up? Now, in a free market, the bank decides who qualifies for a mortgage and private mortgage insurers can make the decision to ensure a risky mortgage.
The beauty of the free market is that some people, mostly real estate speculators will go bust if their real estate investment business is horribly run. The Canada Mortgage and Housing Corporation(CMHC) which is a Federal Crown Corporation put an end to a potential bottoming of the housing market by getting into the mortgage insurance business.
You see in Canada, it’s unlikely that the housing market will crash because if it did crash chances are the Canadian government would be forced to intervene because CMHC only has value if the housing market stays inflated.
Nova Scotia eyeing taxes for homebuyers coming from outside the province, to the best of my knowledge There is nearly $500 billion worth of CMHC mortgage securities in-force. In a free-market environment, money in the form of credit or promises to pay at a later date can disappear if a market goes crashes. Now, this might seem like a horrible thing, but that’s how free markets create EFFICIENCY and lower RENTAL prices.
If the housing market is allowed to correct and housing is built to meet the ACTUAL demands of the people, unprofessional speculators will usually stay out, and building businesses will have to be financed with money that’s usually saved instead of money that’s borrowed. A lot of the building that’s occurring in Canada is being financed by borrowing, so if an investor has equity in a prior home they’ll use that equity to purchase another property.
Now, prior to central banks and in the case of Canada’s -Federally backed mortgage insurance corporations- began intervening in the economy, a person would have to save their own money to put a down payment to purchase a property or have extremely good credit or a solid business plan, to get people to invest. That’s no longer the case anymore, people can now borrow money to speculate on real estate, which inevitably leads to higher rental prices.
Why do rental prices STAY up? Because the CMHC is incentivizing real estate investors to build townhomes, condos, and other properties where rental housing should be. Most Provinces in Canada have rental controls, now why would any real estate company build rental housing when they can make more money and have fewer regulatory problems building condos? This is a no-brainer for an investor.
The problem is so bad that a province in Canada that’s usually having a population DECLINE is having a housing BOOM! Now as we all know the Liberal Party of Canada has been going out of its way to send immigrants to failing Eastern Canadian provinces because you see the problem with Transfer payments, is that it rewards bad ECONOMIC and financial behavior by the governments receiving the money, so there’s no incentive for any Eastern Canadian province to shrink government or change regulatory policies.
So when most financially literate immigrants arrive in provinces like Nova Scotia, they end up leaving as soon as they can, because if they’re highly educated immigrants which many were prior to Justin Trudeau becoming Prime Miniter, they’d immediately see the stupidity in their provincial governments’ policies, that would inevitably lead to slower economic growth. I think Nova Scotia also has health care shortages if I’m not mistaken, Nove Scotia is a beautiful place but there are little to no incentives to grow their economy.
Could this be changing? I don’t know, but I find it hilarious that their Premier now wants to raise taxes on what could be new people purchasing property in the province. The stupidity of politicians and government never ceases to amaze me, nor does the behavior of welfare-loving Canadian voters. It wouldn’t surprise me in the least if this problem accelerates, based on this silly proposal, because you have to remember if the property keeps going up in value, some people will pay the tax, furthermore, for some people, this is merely a place to park their money, this is another reason why the government shouldn’t get involved, a person can’t park their wealth in a rental housing unit, but a person can park their wealth in a condo they OWN!
If their eligible write-offs justify the tax they have to pay to the Provincial government, some wealthy people will pay the tax, which could then morph into something else, like a lobbyist group or a new expensive government task force lol. The stupidity continues
Interesting times ahead!