261 replies to this topic

[nerka]

 Trudeau really has screwed up peoples ability to buy a home.

 

 

Both OSFI and BoC are independent of Trudeau. There's no real indication they'd be doing anything different if we had Harper, Scheer, Mulclair, or tjv as PM

[PraiseKek]

So if lakepoint 2 is in the lot next to lakepoint 1 then excavation is still ongoing as of this morning. I guess they won't start building the foundation then?

[Mike K.]

Right, the excavation is underway. Perhaps what the plan is is to have a contingency plan in place where if the tax remains at the end of the excavation process the build-up will be on-hold, but if the tax is amended or rescinded construction will resume?

[tjv]

Both OSFI and BoC are independent of Trudeau. There's no real indication they'd be doing anything different if we had Harper, Scheer, Mulclair, or tjv as PM

Nope, I was specifically speaking of the stress test brought in by Trudeau and Morneau

 

The Liberals’ mortgage rules included a “stress test” for prospective homebuyers that was meant to ensure they could afford their mortgages in the event of an interest rate hike.

 

https://globalnews.c...t-isnt-working/

 

https://business.fin...ng-middle-class

 

BoC is independent, but has no choice to keep cranking rates to keep up with the US fed who's rate is 0.5% more than Canada.  Expect more rate hikes to come unless you want a 60 cent dollar

[sdwright.vic]

I may not agree with the entire mechanics of the stress test. However, I don't want mortgages just being given out willy nilly either. Don't need a US style crash.

[Mike K.]

The US sub-prime mortgage situation was vastly different to Canada’s lending environment.

[sdwright.vic]

But it could very much end up the same. You have people spending up to 50% of their monthly income on a mortgage alone. Some more than 50%. A change in interest can and will devastate people who are over extended.

Just because people can borrow money doesn't mean they should. Unfortunately the rules used to favor those that had the ability to borrow money, with no consideration of if the could carry that debt long term.

[Nparker]

...Just because people can borrow money doesn't mean they should...

It's a shame more people don't understand this.

[sdwright.vic]

Yeah I am approved for something that could ruin the next 7 years of my life! WOOT!

[Mike K.]

It’s not possible under a regulated lending environment to spend over 32% of your monthly income on a mortgage, property taxes, insurance, strata and heating (that calculation is called the Gross Debt Service). If that’s the case somewhere along the line the home buyer has manipulated their earnings before the lender in such a way as to make the lender believe without any doubt that their earnings are higher.

Of course situations do change, but going into a purchase you won’t be facing a 50% GDS equation.

With RENTALS, on the other hand, there is no limit and no financial institution nor any government bodies regulate how much you qualify to spend on rent so you do, in fact, see a lot of people in our market spending 50% or more on their rent. But then they, unlike a homeowner, are not responsible for a myriad of expenses homeowners are responsible for (and why banks require a relatively low GDS in order to qualify you for that mortgage).

[tjv]

I may not agree with the entire mechanics of the stress test. However, I don't want mortgages just being given out willy nilly either. Don't need a US style crash.

 

The US sub-prime mortgage situation was vastly different to Canada’s lending environment.

I don't think we will ever experience a US style crash here, there were many rules in place long before the stress test.  The problem is the new stress test make it extremely hard to borrow although you would think its simple.  Many people are now being forced to alternate lenders at substantially higher rates.  Do I feel guilty lending money at 20%, yes absolutely, but if I don't do it someone else will

 

Meanwhile we are in a runaway real estate market with prices out of control and no sign of it stopping.  If you haven't bought yet, there is the mad panic feeling that if you don't get in soon you will end up living in a tent somewhere

[Mike K.]

Right, or paying higher and higher rental rates while your ability to put money away becomes harder and harder. There is indeed a mad panic out there to secure real-estate despite so few transactions. When you talk to people in the industry about what’s happening they’ll tell you buyers are out in droves but few are able to buy. We’ve never had this situation in Victoria.

[tjv]

I can't speak for everybody, but I went back out into the market recently just to see where salaries were and I was pleasantly surprised to see salaries for me have doubled in 11 years.  Salaries are increasing to deal the the higher cost of real estate or rents

[sebberry]

So our regulatory regime intended on making housing more affordable and reduce risk has only made housing less accessible forcing people to pay more and more for rent that doesn't build equity.  Great.

[sdwright.vic]

So my looking at changing from renter class to homeowner does leave me baffled at times.

I pay $1050 a month, heat and hot water included. Have access to an on-site pool and gym. I do have to go to a laundry room to do laundry, but that's not a big deal. I can get my four loads of laundry a week all done at the same.

With a down payment of 30% I am still looking at a monthly payment of $1500 to $1800 a month. I do not even think of a house, so that throws strata fees on top of it all. So add another $300 to $500 a month. This takes me to $1000 to $1500 a month more than I pay now. Of that $300- $500 a month would never equate to equity (strata fees). Taking that amount off my monthly rent, I am really only throwing away $550 a month renting.

So instead I take the $1500 a month in put into a variety of investments at several different levels of risk, and some with the ability to liquidate quickly if we need to.

Am I making as much as if I owned something, most likely not. Am I make money, yes. I am also very diversified to protect against a number of different factors.

I don't have kids, we have excellent life insurance privately and through work that will keep income levels as is if something should happen to the other. So, buying something has just stopped be a concern.

We have 10- 15 years till retirement, at which time we will go to one of those warm tropical locations that ex-pats can live with a confirmed income of $1000 US a month (subscribe to International Living). Which with pensions alone is already in the bag.

Guess the point is, yes people are just giving up and looking at other ways to invest and save money.

[LJ]

I have been reading some economic forecasts recently and a couple of them are pointing to a recession coming, as early as March 2019.

 

Maybe hold off any big ticket item purchases and see how it unfolds.

[sdwright.vic]

I think with trade wars and such... pretty spot on.

[tjv]

there is no doubt a recession is coming, its just a matter of when not if.  At that time the smart money will be buying up development property as housing prices soften maybe 5-10%, start the rezoning process and get ready to hit the ground running when the boom and prices rise again

 

Recession or not, we aren't getting a US style housing crash around here.  that is a fantasy.  the fantasy is renters who think their 40+ year old buildings with their massive surface parking lots will still be around in 10 or so years

[Nparker]

...the fantasy is renters who think their 40+ year old buildings with their massive surface parking lots will still be around in 10 or so years

I sure hope this much of your prediction comes true.

[lanforod]

SD is in a good rental situation now, which is why it definitely makes sense for you to stay put, financially. If you were looking for something to rent now though, your numbers would be significantly different. Also, I think you've pegged those strata fees too high, more likely 200-400.