Bank rules may cool Vancouver condo market: Flaherty
Published Wednesday, April 4, 2012 7:22PM PDT
Federal Finance Minister Jim Flaherty is predicting changes at Canadian banks will soon slow down Vancouver's condominium market, pointing to cooling off already seen in Toronto.
Flaherty, who was in Vancouver on Wednesday to talk about his latest budget, told reporters banks are tightening lending rules for home buyers.
"I think that's wise," he said. "We've warned for some time about the danger of an overheating housing market, were it to become overheated. It's better that the market fix it than government has to fix it. I've tightened up the mortgage-insurance market three times in the last six years -- really, I don't want to do it again."
Flaherty said he was basing his comments on conversations he's had with people who build condos and what he's been told by some of Canada's banks.
Flaherty and financial experts have been warning for some time that homeowners should be cautious about how much debt they take on, because interests rates can increase.
A recent report from economists at the Bank of Montreal cautioned the days of ultra-low mortgage rates were coming to an end.
The report, issued March 24, said the U.S. economy seemed to be building steadily and central bankers on both sides of the border have become more comfortable with the economy and less comfortable with low interests rates that are fanning hot housing markets.
The minister said in his budget last week that the government would implement "enhanced supervision" for the Canadian Mortgage and Housing Corp., the body that insures loans for buyers who put down less than 20 per cent of the cost of the home.
"Interests rates are historically low. They only have one way to go, which is up. Canadians need to make sure when they take out a mortgage that when interests rates go up they'll be able to afford it."
The minister wouldn't reveal what changes are coming for the Canadian Mortgage and Housing Corp. He said an announcement is coming soon..
Andrew Hasman, a Vancouver Realtor with Re/Max-Andrew Hasman Realty, has sold for two decades in the city and agreed the market is cooling slightly.
He also agreed new banking rules will likely have an impact on the Vancouver condo market, but he didn't seen a major correction on the horizon.
"I don't think there's a major run for the exits. I think a lot of the people on the market for sale are those who want a sale if they could get so much money for their property. No one is in a forced position to sell."
He said Vancouver's market appears to be balanced -- neither a seller's nor a buyer's market.
"Five or 10 per cent (drop in condo sales) could be in the cards," he said.
However, Hasman said Vancouver's market doesn't follow economic trends like other Canadian markets, mainly because many buyers are coming from Asia.