Housing Rules Change

Overall, I believe the housing market is sound, but as minister of finance, I want to make sure we are proactive in assessing and addressing the factors that could lead to excess risk,” Finance Minister Bill Morneau

This quote was made by Canada’s Finance Minister who is currently tightening mortgage requirements and trying to limit the amount of foreign money in Canada’s housing market.

These changes mean that all insured mortgages will have to undergo a stress test to make sure borrowers will still be able to make their payments if interest rates go up. A tax loophole is also being changed so that only Canadian residents can use the principal residence tax exemption.[1]

While these mortgage rules and tax exemptions are being tightened, the rental and housing market continues to become more unaffordable in Toronto. This is the case despite condominium construction in Toronto being at a historically high level.[2]

There are many factors behind the unaffordability of Canada’s housing market. Studies have shown that Canada is becoming a more urban nation and immigration ensures that the population and hence demand for housing keeps growing. The recent increase in people living in the country in 2015 is the largest since 1988, with many settling in Toronto.[3]

Recent studies have also concluded that foreign money is having a huge effect on the housing market in Toronto and Vancouver. Foreign buyer’s purchases are virtually equal to the value of new building permits in Metro Vancouver each year.[4]

If foreign nationals don’t occupy or rent their new homes, the rental market shrinks. With the average rent for a Greater Toronto Area condo now pushing $2,000 a month, young professionals are now struggling to rent[5]. With wages not going up similarly, a recent report by Statscan has reported that Toronto has lost the highest number of young people since 1999-2000.[6]

With the costs of real estate being documented to drive young workers out of the market, how can Canada’s Finance Minister say that the housing market is sound? Why is the risk to Canada’s housing market of more importance than increasing unaffordability?

[1] http://www.parrysound.com/news-story/6909045-impacts-of-housing-rules-uncertain-morneau/

[2] http://www.cbc.ca/news/business/toronto-condo-construction-1.3602950

[3] http://globalnews.ca/news/2969477/canadian-population-sees-biggest-spike-since-1988-thanks-to-immigrants-statscan/

[4] http://thetyee.ca/Opinion/2016/07/12/Chinese-Buyers-Vancouver-Home-Prices/

[5] http://www.cbc.ca/news/business/rentals-vancouver-toronto-young-professionals-1.3802944

[6] http://www.theglobeandmail.com/globe-investor/personal-finance/genymoney/millennials-flock-to-city-outskirts-in-search-of-affordable-housing/article30273404/

Opening Post

“Law is nothing else but the best reason of wise men applied for ages to the transactions and business of mankind.” – Abraham Lincoln As an opening post I thought it would be interesting to explore the quote above. It is interesting to note that while this quote gives the impression that all law is […]