Finance Minister Jim Flaherty visited Vancouver on Wednesday to talk about his latest budget, which did not include any changes to mortgage rules, but that did include a vague notion about more supervision for CMHC, the Crown agency that insures mortgages. While there, Mr. Flaherty said that he’s already seen a cooling off in Toronto mortgages and sales, and that he expects to see the same thing happen around the country.
Flaherty said that he’s had many conversations, both with the banks and with some of Canada’s builders and he senses that things are going to get tougher based on market conditions, not Ottawa-enforced restrictions. And, he says, he’s encouraged by the actions the banks are taking themselves. “I think that’s wise,” he said on the meeting on Wednesday. “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 three times in the last six years – really, I don’t want to do it again.”
Flaherty also said he believes the tightening of the rules that the banks are now taking upon themselves will also slow the Vancouver condo market, one that no one can deny is in serious trouble of overheating, if it hasn’t boiled over already. Andrew Hasman, a Realtor in Vancouver, didn’t disagree with him saying, “[A] five or ten percent drop in condo sales could be in the cards,” and that Vancouver’s market right now is neither a buyer’s nor a seller’s market , but a balanced one. “I don’t think there’s a major run for the exits,” added Hasman. “I think a lot of 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.”
The one thing Flaherty didn’t touch on during his Vancouver visit was the new provisions set out in the budget for CMHC, which really told Canadians nothing except for the fact that the Crown organization could expect “more supervision.” He said there would be an announcement soon on exactly what that supervision would include and the impact it would have on the mortgage market.
And just like in good ol’ Flaherty fashion, he did end his visit with his usual warning about taking on too much HELOC and mortgage debt. “Interest rates are historically low,” he said. “They only have one way to go, which is up. Canadians need to make sure when they take out a mortgage that when interest rates go up, they’ll be able to afford it.”
