No Housing Bubble in Canada
By Brian Madigan LL.B.
According to the federal Minister of Finance, there’s no housing bubble in Canada.
However, Jim Flaherty pledged quick action from the feds if there were.
Flaherty, being interviewed on 21 December 2009 indicated that recent price increases for homes in Canada were due to a confluence of factors including:
• low interest rates,
• an improving economic outlook, and
• a stabilizing job market.
Before the government would take any steps to intervene, there would have to be clear evidence of an asset bubble in residential real estate in Canada.
If the government were to bring in new measures to stabilize the housing market, the changes would likely be similar to the 2008 changes when Canada tightened the CMHC mortgages rules on insured home loans providing:
• maximum term of 35 years, and
• minimum down payment of 5 percent, up from zero
So the changes, if any, are not expected to be drastic. According to Flaherty “If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments”.
Both the Minister of Finance and the Prime Minister have advised Canadians to be cautious about borrowing money, since interest rates are at an all-time low, and really have nowhere to go but up.
Bank of Canada Governor Mark Carney has pledged to keep interest rates low until 1 July 2010. The current bank rate is 0.25% per annum.
Flaherty said he is worried more about currency speculators who might encourage swings in the value of the dollar than he is about it remaining high.
So, at the moment, Canada will monitor but not make any adjustments to the dollar, the bank rate or the economy other than continue with the federal stimulus program. There will be a budget in March 2010.
Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com
