This weeks top stories include how critics of the changes to the mortgage regulation guidelines are calling for a claw back to the changes, how buyers of the Trump International Hotel & Tower in Toronto are seeking a probe into the sales of units in the tower by the Ontario Securities Commission, how Bank of Canada governor Mark Carney will become the new head of the Bank of England, how rental vacancies in the apartment sector are at a low and how the cooling housing market isn’t bad news for everyone.
It seems that the recent changes to the mortgage lending guidelines are doing exactly what they were suppose to, slow the housing market and slow house price gains while reminding home owners of the costs of over borrowing cheap money. The Canadian Association of Accredited Mortgage Professionals (CAAMP) stated that the new restrictions were killing consumer confidence in the housing market and could even jeopardize the economy as a whole.
Toronto builders joined CAAMP stating that the federal governments mortgage rules are the sole reason for the cooling housing market that witnessed a decline of 14%, in the month of October, below their long term average. Finance Minister Jim Flaherty has continued his stance stating that he does not intend to remove any mortgage restrictions that were recently imposed. Benjamin Tal, deputy chief economist at CIBC World Markets weighed in, “I think the government is not responsible, remember the housing market was slowing already when the government introduced these [latest] measures. In a slowing market, it is that much more effective. It was a prudent move.”
Jim Murphy, chief executive of CAAMP commented, “The government in general is walking a tightrope here. On the one hand they are concerned about household debt and all these insured mortgages. But on the other side, housing is an important contributor to the overall economy.” 18% of all jobs in Canada that were created between 2006 and 2011 related to the housing market either directly or indirectly. Do you think that the economy will be directly affected by the new mortgage regulations? Please comment below.
Buyers of hotel condo’s in the Trump International Hotel & Tower in Toronto are requesting that the Ontario Securities Commission (OSC) take immediate action and begin a formal investigation into the tower. This may be the final option of hope for many of the buyers who failed on Friday of last week to convince the courts to intervene and appoint an inspector to review financial dealings based around the project.
Buyers had until Wednesday of this week to hand over final payments on their units or ultimately, be in violation of deals that were completed seven years ago when the project launched. Talon, the developers and the ones that handled sales, has launched a law suit in Newmarket Superior Court against seven investors who are trying to get out of their contracts based on a “material change” clause under the Ontario Condominium Act. The material change that occurred was based around maintenance fee’s and taxes that were between 30% to 50% higher than original projections.
Certain buyers are losing $175 a day on suites where costs are outweighing hotel revenues. Others just can’t obtain a mortgage to close on the deal with appraised values not coming in at the purchase price or banks not looking at the property as residential but rather commercial. New York based Trump Organization litigation counsel commented, “Trump had nothing to do with the sales process. That being said, this appears to be merely a desperate, last-ditch attempt by a small group of buyers to get out of what were clear and unequivocal purchase contracts. The building is built and the hotel is a success. It’s classic buyers’ remorse.” What do you think? Please comment below.
Bank of Canada governor Mark Carney is making waves in the financial industry as he will soon be the most prominent unelected official to step into the British economy. Prime Minister David Cameron shocked many with his announcement that Britain’s struggling economy would be put into the hand of a foreigner at a cost of almost $1 million a year.
Finance Minister Jim Flaherty was not so excited about the news and commented, “It is our loss, of course it is. Mark has been a superb governor of the bank.” Flaherty hand picked Carney as a central banker in 2008 and hasn’t looked back since. Carney will have many challenges in front of him and was noted as saying, “It is very important for the global economy that the U.K. does well, that it succeeds in this re-balancing of their economy, that the reform of the British financial system is completed.” He went further by saying, “I was never going to be the governor of the Bank of Canada forever.”
Bank of England Deputy Governor Paul Tucker was the first choice for many, especially since Carney was asked earlier in the year and declined. Carney is noted as the premier central banker of his generation. The British chancellor commented on Monday, “He is quite simply the best, most experienced and most qualified person in the world to do the job.” What do you think? Can Carney fix the problems in Britain and what state will Canada be in once he is gone? Please comment below.
The vacancy rate for rental housing has been on a steady decline since 2007 and has currently reached its lowest point in 12 years. This may lead to new construction of apartment buildings in the near future as there is a void that needs to be filled.
Places like Toronto have not witnessed any major apartment construction in the past 40 years according to Pierre Bergevin, CEO of real estate firm Cushman & Wakefield Ltd. With increases to rents and demands for affordable housing on the rise, this may be enough to entice developers to come into the market.
Residential multifamily vacancy rates are currently less than 3% in major urban markets, which may even entice pensions funds to re-enter the multifamily real estate market. This could also lead to many Trust companies to join in as well. What do you think? Please comment below.
CIBC, one of Canada’s largest banks issues a report this week stating that a decline in Canadian home prices may not be all negative news. CIBC World Markets was noted as saying that the slowing of Canadian home sales will hinder economic growth but where there are winners, there will also be losers when it comes to the economy.
Avery Shenfeld, CIBC’s economist, stated that homeowners may have to reduce their retirement spending if the sale of their property brings in less money than expected. On the other hand, first time home buyers will be at an advantage with lower house prices that can free up more money for retail spending. The report from CIBC World Markets plays down the concerns of a disastrous U.S. style housing crash but does note that some markets in the Canadian real estate sector are at risk of a rapid decline. What do you think? Please comment below.
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