Ever since Jim Flaherty announced the newest rule changes made to mortgages in Ottawa, people have been talking about who they’re going to hurt; namely, first-time homebuyers. But there’s one group that will be ready to welcome the new rules with open arms – that is the group of foreign investors.
The new rules of course, stipulate that amortization periods for insured mortgages will now only be 25 years, as opposed to the 30 years where it stands now. This takes away the option for many first-time buyers who would usually take out a mortgage with 5 per cent down and a 30 year amortization that they can afford. Changing that to 25 years means much higher monthly payments, which young first-time buyers simply cannot afford.
This rule is going to put those first-time buyers out of the buying market, and into the rental market. And that will force a correction on Toronto and Vancouver homes of about 5 per cent, according to experts. That correction won’t be enough to help those looking to make up 15 per cent of their down payment, but it will help foreign investors, who are mostly interested in Vancouver and Toronto mortgages – the costliest ones in the country.
The new rules won’t affect foreign investors simply because they have cash. They have money to invest in foreign properties and they know that Canada is a relatively sound place to do it. Because they have so much cash they can easily afford the 20 per cent down payment, and take on any amortization period they wish. Although they usually have the money to afford either a 25 or 30-year.
Derek Lai, director of international properties for Colliers International real estate services says that out of all the Canadian cities, Vancouver and Toronto. Vancouver is especially attractive to those from China’s mainland because of Canada’s excellent education system, and because it’s so close to home.
“Buying sentiment for overseas properties among Chinese mainland investors has been gaining strong momentum over the past few years,” says Lai in a report. “To date, about 20 per cent to 40 per cent of the foreign property investors in these destinations are from the Chinese mainland.”
The fact that the new rules will restrict those of us here at home but will give new opportunity to foreign investors is sure to add fuel to the fire on an already heated debate. Many think that Canada should restrict foreign property investing altogether, in order to open things up for us who live in the country. Others though disagree, saying that we need foreign investors – and their money – to keep our economy churning.
What do you think about foreign property investors in Canada?
