Ottawa has brought this country's housing fantasy to an end

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Ottawa has brought this country's housing fantasy to an end
Rob Carrick
The Globe and Mail
Published Monday, Oct. 03, 2016 4:48PM EDT
Last updated Monday, Oct. 03, 2016 9:16PM EDT

The fantasy of endlessly rising house prices is over.

If the housing market doesn’t respond to measures announced by the federal government on Monday, then expect more action ahead. Argue all you like about how economic and real estate fundamentals affect prices. In the end, it’s government action that will bring housing to heel.

Thank god for some adult supervision in housing. We need it for all the people who are basing the biggest financial move of their lives on the idea that houses always go up in price. Ideally, government intervention today prevents a painful correction ahead.

A lot of people are torqued about the influence of foreign buyers on our hottest housing markets, and the feds did target this group. But a measure with much wider applicability is the stricter enforcement of a mortgage rate stress test that people must take if they have a down payment of less than 20 per cent and therefore must have mortgage default insurance.

You now have to take this test if you’re in this group and want a variable-rate mortgage or a fixed-rate mortgage with a term under five years. Starting with mortgage insurance applications made on Oct. 17 and thereafter, fixed-rate mortgages of five years and longer will be included as well. Mortgage broker David Larock said two-thirds of borrowers today are going with the five-year rate, so including them in the stress test is a major development.

This is all the more true when you consider just how tough the stress test is. The idea is to see if you can handle rates at levels that are much higher than they are today. The reference rate is called the Bank of Canada conventional five-year fixed posted mortgage rate, and it’s based on rates advertised by the Big Six banks. This rate now sits at 4.64 per cent, which compares to about 2.4 per cent for a nicely discounted five-year fixed rate in today’s market.

A lot of housing bulls have based their argument on a view that interest rates are low and not about to rise in a serious, sustained way because the economy’s too weak to stand it. But the more widely applicable stress test is like a back-door interest rate hike for some buyers.

“It’s the same as if rates went up to 4.64 per cent overnight,” Mr. Larock said. “There is a danger that government might have overtightened.”

The existing stress test was just as tough. But it only affected a minority of buyers who, if they flunked the test, could move to a five-year fixed term and avoid it altogether. Now, that option is disappearing.

Only a minority of mortgages in Canada these days require mortgage insurance, which means a lot of buyers have down payments of 20 per cent of more. While it’s not widely known, lenders are increasingly having these mortgages insured as well. Lenders are bearing the cost of the insurance, so it’s basically an invisible process for the customer.

Starting Nov. 30, however, lenders will have to be more stringent in cases where they’re insuring the mortgages of clients who have a down payment of 20 per cent or more. These customers will have to meet the same tough borrowing requirements as people with high-ratio mortgages (down payments less than 20 per cent). For example, the stress test will be used and the maximum amortization period will be 25 years.

Finally, the government is closing loopholes that foreign buyers use to avoid paying capital gains tax on homes in this country. Canadians do not have to pay tax on the gains if they sell their principal residence for more than they pay.

If all of these measures combined don’t contain the housing market, there’s always what the government calls “lender risk-sharing.” If an insured mortgage defaults, lenders are 100 per cent covered. Ottawa wants to consult on the idea of lenders bearing at least some of the risk of a default, a change that would probably result in lenders being less aggressive with mortgage rate discounts.

Just as important as these measures themselves is the message they send to those who believe what’s happening in our housing market today is normal or healthy. Ottawa’s worried and it’s taking action. Prices will not rise endlessly – base your financial decisions accordingly.

 

[贵圈]

是fantasy就早点醒。
不是的话，你掐他也醒不了。
掐掐试试先。

 

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Ottawa tightens mortgage requirements and targets foreign money
Finance Minister Bill Morneau announces new rules today in Toronto
By Pete Evans, CBC News Posted: Oct 03, 2016 9:52 AM ET Last Updated: Oct 03, 2016 1:35 PM ET

Finance Minister Bill Morneau announces new rules on foreign ownership of Canadian homes in Toronto on Monday. (Adrian Wyld/Canadian Press)

Ottawa has announced new rules aimed at limiting foreign money into Canadian real estate and ensuring that borrowers take on mortgages they can afford.

"Overall, I believe the housing market is sound, but as minister of finance, I want to make sure we are proactive in assessing and addressing the factors that could lead to excess risk," Finance Minister Bill Morneau said in making the announcement Monday in Toronto.

They include a move to close a loophole in the tax laws that allows non-residents to buy homes in Canada, and then get a tax exemption to avoid paying capital gains when they sell the home by claiming it as a principal residence.

Morneau takes measures to cool Vancouver and Toronto housing markets

Starting now, "an individual who was not a resident in Canada in the year the individual acquired a residence will not be able to claim the exemption for that year," Morneau said.

Canadians who were legitimate residents at both the time of purchase and time of sale will still be able to take advantage of the principal residence tax exemption, Ottawa says.

Toronto real estate lawyer Bob Aaron says the move is a reasonable step to prevent tax leakage.

"There's a lot of people who are declaring their homes as principal residences when they're not," he said in an interview. "I think it's more of cracking down on the existing law rather than plugging a loophole."

In addition to cracking down on tax leakage by foreign money, another change is that from now on, all insured mortgages must undergo a "stress test" that ensures a borrower's ability to make their mortgage payments at a higher interest rate.

Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank's five-year posted mortgage rates, which the Bank of Canada says currently average 4.64 per cent.

That requirement was already in place for many borrowers, including so-called "high-ratio" mortgages for people with small down payments, and borrowers who borrowed money on terms of less than five years.

But from now on, any insured mortgages will be tested against that higher bar. Anyone who already has a mortgage, or who has already applied for mortgage insurance, is exempt from the new rules, which will formally kick in on Oct. 17.

That could have a big impact on buyers.

According to interest rate-comparing website RateHub, a hypothetical borrower with $100,000 in annual income and $40,000 to put down on a house today could qualify for a house worth $665,435 with a mortgage at 2.17 per cent, which three lenders are currently offering, according to the site.

But under the new rules, that same buyer could only qualify to buy a home for $505,762, or 24 per cent less than before the rules kick in. The lender is still willing to offer that lower rate, but the borrower would no longer be allowed to get it under the stricter rules, because his or her finances would be tested as though the mortgage rate is more than twice as high as it is in reality.

That's why BMO economist Sal Guatieri thinks the new stress test is the more significant change of those announced Monday.

"This measure will make it harder for buyers to qualify for a loan, especially in high-priced regions," he said.

"This means that many potential buyers won't qualify for an insured mortgage, which requires the total carrying costs of a home ... to consume no more than 39 per cent of gross family income," Guatieri said.

"The measures announced today should help to reduce the risk of a housing market correction in Vancouver and Toronto and a broader retrenchment in Canadian household spending arising from elevated debts."

The issue of foreign money's impact on Canadian housing has come under intense scrutiny in recent months as housing prices have been increased at double-digit annual paces in the two large markets: Toronto and Vancouver.

This summer, the government of B.C. slapped a 15 per cent surtax on foreign buyers in the Metro Vancouver area in an attempt to cool runaway price inflation.

CIBC said it expects that Toronto will have "no choice" but to do the same at some point.

 

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Ottawa’s housing reforms target foreign buyers, mortgage debt
Tamsin McMahon
TORONTO — The Globe and Mail
Published Monday, Oct. 03, 2016 11:22AM EDT
Last updated Monday, Oct. 03, 2016 10:40PM EDT

Ottawa has taken a broad brush to curbing risks in the housing market, unveiling new measures to crack down on speculation by foreign investors and make it harder for homeowners to dig themselves deeply into mortgage debt.

Finance Minister Bill Morneau announced a series of changes, including more stringent “stress testing” for borrowers who take out insured mortgages and rules aimed at mortgages with high down payments.

In an interview with The Globe and Mail, Mr. Morneau said the new measures are aimed at addressing concerns that extremely low interest rates have encouraged Canadians to overextend themselves financially, posing a risk to both individual homeowners and the broader financial system.

“We are getting at the overall concern around family indebtedness and a sense that we recognize that Canadians are relatively highly indebted,” he said. “We want to ensure that we have measures in place to help them to take on risks that they can afford, especially in the situation where mortgage rates go up or their family income goes down.”

The government also unveiled tax measures to close loopholes that allow real estate speculators to avoid paying capital gains tax on the sale of investment properties. The changes follow a Globe investigation in the Vancouver area that revealed a network of local and foreign buyers flipping homes for profit and avoiding taxes by classifying them as principal residences.

New rules will make it mandatory for anyone who claims an exemption on capital gains tax when selling a home to report the sale on their tax returns. Families will be allowed to claim an exemption on only one home a year and the home’s owner must live in the property.

The Liberal government announced its first interventions in the housing market last December, introducing higher down payments for insured mortgages on the portion of a home priced between $500,000 and $1-million. The measures were targeted primarily at high-priced Toronto and Vancouver. On Monday, Mr. Morneau called the higher down payments “the right measures at the time,” but said that Ottawa saw it had more work to do to tackle risks in the housing market.

Two new measures are aimed directly at the country’s mortgage insurance market, which has a combined government-imposed cap of $900-billion for the Canada Mortgage and Housing Corp. and its private-sector competitors.

Starting Oct. 17, borrowers who take out insured mortgages that are fixed-rate loans of five years or longer will be subjected to a more stringent “stress test,” ending a two-tier system for the country’s mortgage market.

Existing rules require home buyers who take out short-term or variable-rate mortgages with down payments of 20 per cent or less to prove they can afford payments at a much higher interest rate than they will actually pay. Meanwhile, borrowers who take out fixed-rate insured mortgages of five years or longer have their income tested against the interest rate that they will actually be paying.

The end result is that borrowers can now typically qualify for much larger mortgages if they opt for a longer-term, fixed rate mortgage.

Under the new rules, all borrowers who have insured mortgages will have to qualify at the most common rate posted by the Bank of Canada, which is now about 2 percentage points higher than the discounted mortgage rates offered by most lenders. The rules apply only to new mortgages, not renewals, but they are significant given that a majority of homeowners are thought to take out the types of fixed-rate mortgages that will be affected by the stricter qualification requirements.

Ottawa also unveiled new measures aimed at portfolio insurance, a type of bulk insurance that banks use for mortgages with down payments of 20 per cent or more. Starting Nov. 30, the federal government will now require portfolio-insured mortgages to qualify under the same criteria used for the insurance taken out on homeowners with small down payments. Portfolio-insured mortgages will now be limited to a maximum amortization period of 25 years and a maximum purchase price of less than $1-million. It requires all portfolio-insured mortgages to be owner-occupied, prohibiting insurance on rental homes and investment properties.

Mr. Morneau said the stricter “stress test” for some insured mortgages will likely have the greatest impact on expensive housing markets such as Toronto and Vancouver, but acknowledged it will also have an impact on home buyers in softer markets, such as Alberta and Atlantic Canada. “We’re trying to manage the risk for all Canadians,” he said. “So we worry about someone in Halifax or Ottawa or Saskatoon as much as we worry about someone in Toronto or Vancouver.”

Ottawa also plans to release a consultation paper and start discussions on a “risk-sharing” agreement that would require lenders to share in any losses on government-backed mortgage insurance.

Mr. Morneau said he expected the changes announced Monday would have a “modest” and gradual effect on the Canadian housing market. “It’s hard to state with certainty what the outcome will be,” he said. “For some buyers they might defer their purchase for a little while; for other buyers they might decide to buy a slightly less expensive home.”

However other industry professionals predicted the impact would be more profound.

Changes to fixed-rate qualification rules for insured mortgages “could have a material cooling effect across all markets in Canada,” wrote Royal Bank of Canada senior economist Robert Hogue. Rate-shopping website RateHub.ca calculated that a family that earns $100,000 and has a $40,000 down payment could qualify for a mortgage of more than $665,000 under the current rules, but only about $505,000 under the stricter new rules.

Bank of Montreal senior economist Sal Guatieri said the changes might make it easier for the Bank of Canada to slash interest rates further without adding much more fuel to the housing market. The new measures will almost certainly slow down the growth of mortgage lending, said Dominion Lending Centres chief economist Sherry Cooper.

Both Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory issued statements saying that they welcomed the increased federal focus on housing issues.

The new measures should help cool demand in metro Vancouver’s expensive housing market that has already slowed significantly in the wake of a new provincial tax on foreign buyers in the region, said Vancouver-area realtor Adil Dinani. “It will do what they want it to do and that is create a little bit of uncertainty as to where the market is and that will create a more cautious approach by buyers,” he said.

In a bid to cool its hot housing market, British Columbia introduced a 15-per-cent tax on foreign buyers this summer, which applies to the sale of all residential properties within 22 communities of metro Vancouver. The levy applies to buyers who are not Canadian citizens or permanent residents, and corporations that are either not registered in Canada or are controlled by foreigners, and it adds $300,000 to the purchase of a $2-million home.

B.C. didn’t consult with federal officials on its foreign-buyers’ tax, Mr. Morneau said. As federal Finance Minister, he only had a few hours advance warning before the provincial government announced the surprise move in late July. “We weren’t engaged in that decision,” he said, adding it was too soon to tell whether it would be effective.

 

[b4w]

有中文的吗？看不懂~

 

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Feds seek to ease housing market risks, slow influx of foreign cash

Alexandra Posadzki, The Canadian Press 10.03.2016

Finance Minister Bill Morneau makes an announcement on housing in Toronto Monday, October 3, 2016. The federal government has announced measures intended to stabilize the real estate sector amid concerns that pockets of risk have emerged in some housing markets, particularly those in Toronto and Vancouver. THE CANADIAN PRESS/Nathan Denette

TORONTO - The federal government is taking steps to ease emerging risks in the country's housing market with new measures to slow the injection of foreign cash and to tighten eligibility rules on prospective borrowers.

Finance Minister Bill Morneau's announcement Monday came amid concerns that real estate costs in the sizzling Toronto and Vancouver markets are out of reach for many Canadians. Some fear foreign investment money in these housing markets has helped drive up prices.

Morneau's package of measures, which include strengthening mortgage rules, also reflect growing concern that Canadians have too much debt.

"Pockets of risk have begun to emerge" following several years of exceptionally low interest rates that have changed how lenders and borrowers view debt, Morneau told a news conference in Toronto.

"Overall, I believe the housing market is sound, but as minister of finance I want to make sure that we're proactive in assessing and addressing the factors that could lead to excess risk," he said.

"We will continue to consider how we can ensure that the market stays stable for Canadians and we believe these measures are going to be appropriate to do that."

It remains to be seen whether the changes will have a cooling effect on hot housing markets or how much more difficult it will be for would-be homebuyers to secure mortgages.

Starting Oct. 17, all insured mortgages will have to undergo a stress test to determine whether a borrower could still make mortgage payments if faced with higher interest rates or less income. Previously, such stress tests weren't required for fixed-rate mortgages longer than five years.

On Nov. 30, several eligibility rules will tighten on mortgages where borrowers made down payments of at least 20 per cent of the purchase price.

In a move to reduce the flow of foreign cash into markets like Toronto and Vancouver, the government said it will tighten a loophole on an exemption that allows homeowners to avoid paying capital gains tax on the sale of a principal residence.

Going forward, that exemption will only be available to Canadian residents, Morneau said, and families will only be allowed to designate one home as their primary residence.

"Federal government policy alone cannot control house prices; certainly not directly," Morneau said. "But it does have a role in ensuring that housing markets are stable and functioning efficiently."

Phil Soper, president of Royal LePage, said in an interview Monday that he didn't expect Ottawa's measures for insured mortgages to have a significant impact on the overall market.

Instead, he predicted they would serve more as a "tap on the brake" that would lead to a "slight, additional slowing of a market that's already slowing."

"The market will cool on its own accord," Soper said. "The impact of foreign investors isn't large enough to change the force of the overall market."

In recent years, governments at different levels have made several rule changes to address concerns about housing markets in Canada.

Last December, Morneau increased the minimum down payment for homes over $500,000 to 10 per cent from five per cent, a measure aimed specifically at the Toronto and Vancouver markets.

In July, British Columbia imposed a 15-per-cent tax on foreign nationals looking to but homes in Vancouver.

Vancouver Mayor Gregor Robertson said in a statement Monday that he was encouraged by Ottawa's closure of the capital-gains loophole. He said the loophole allowed for "unregulated, speculative global capital to impact Vancouver's real estate crisis."

"Vancouver's recent home price increases are not sustainable, they put our economy at risk, and shut many local residents out of home ownership," Robertson said.

A report released last week by Swiss bank UBS singled out Vancouver as being at serious risk of a housing bubble.

Morneau said many families looking to buy homes have found themselves priced out of the market, while others have had to pile up high levels of debt.

Chris Ballard, Ontario's housing minister, called the federal measures interesting and said the Ontario government is very concerned about affordable housing in the province.

Ottawa also announced Monday that it will launch a public consultation this fall to explore the possibility of introducing "lender risk sharing" — a policy that would see the banks shoulder more of the risk for mortgage defaults.

 

[冷笑99声]

这个， 对渥村基本不适用， 属于扯淡范畴滴