The Toronto and Vancouver housing markets have cooled rapidly in the wake of Ottawa’s latest bid to stop a bubble, with many first-time buyers knocked out of the running.
Finance Minister Jim Flaherty put the July 9 changes into effect to curb growing mortgage debt levels and take some steam out of house prices. Among other things, the new rules cut the maximum length of insured mortgages to 25 years from 30.
Among the latter is Toronto-Dominion Bank chief economist Craig Alexander, who estimates that national home prices are 10 to 15 per cent too high.
- of course, my view is that 10-15% correction may be a gross understatement.
The proposed revisions , to go into effect next January, will put more emphasis on age (ie: younger immigrants), language skills and professional credentials equivalent to Canada's — while de-emphasizing work experience abroad.
The problem with the current point system is that those that don't fluently speak one of Canada's official languages, or those whose education credentials don't transfer over to Canada, can still reach the 67 mark.
These new rules are meant to attract immigrants who can, theoretically, be successful in jobs in their field of study.
3. don't underestimate demographic changes, including inter-provincial out-migration, population aging (1st wave of baby boomers hitting 65-66 years of age already)
4. HELOC & other OSFI changes, plus CMHC's rapidly declining projected mortgage insurance-in-force, will no doubt further constrain mortgage/loan credit availability.
5. Household debt at peak levels.
Today's news: Recession risk grows due to indebted consumers
- a housing downturn in a city whose economy is heavily dependant on RE-related industries, coupled with declining consumer spending from the recession, will result in decreased income and job losses.
Agreed a "healthy" correction will occur.
question is, how much is "healthy", and how much is "too much".
based on price-to-rent and price-to-income ratios, if reversion to the mean is "healthy", then -30% to -40% correction will bring Vancouver housing price down to "healthy" levels.
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