Tighter mortgage rules have led to unsold condos
The tighter lending restrictions introduced in 2012 may have had unfortunate consequences. The rules were viewed as an attempt to cool the Toronto
markets, but a new report suggests that smaller cities have felt the impact instead. Cutting the maximum length of mortgage insurance amortization to 25 years from 30 has put off some first-time buyers, resulting in a glut of unsold condos in cities such as Winnipeg
, Montreal and Moncton
. The Globe and Mail
reports that in Quebec there was a boom in condo purchasing in the year preceding the tighter rules on mortgages with a third of buyers taking out loans with 30-year amortizations, while in Montreal 40 per cent of buyers did so. Paul Cardinal, manager of market analysis for the Quebec Federation of Real Estate Boards, said that the restrictions had a similar effect on the market as raising interest rates by one percentage point. Read the full story.
BC will be the economic star this year, says Conference Board
British Columbia is set to shine this year with economic growth higher than previously forecast. The Conference Board of Canada has upgraded its prediction for growth in the province to three per cent; last fall it suggested 2.6 per cent. The weaker loonie coupled with a stronger U.S. economy is driving the growth, says the board. The report predicts that the housing market in BC will remain strong, despite uncertainty over the potential liquefied natural gas industry. Prices for homes are likely to continue to edge higher along with activity in new and existing home sales. The Conference Board is predicting that most other housing markets will see slower growth this year. Its winter outlook for Canada as a while suggests growth of 1.9 per cent nationally, down from 2.4 per cent last year, mainly due to the impact of lower oil prices in some provinces. It expects the Bank of Canada to keep interest rates low through this year with any increase coming in 2016.
Consumer confidence hits 12-month low
Confidence in the economy continues to slide, according to the latest Bloomberg Nanos Canadian Confidence Index
. The index fell to 53.83 last week, compared to 54.15 a week earlier and below the average of 55.42 for the year so far. On the economy as a whole there was a slight rise in optimism that things will be better in six months, but the respondents are less confident about their personal finances and job security. Data for confidence in real estate prices improved slightly and remains above the average for this year so far, with 33.42 per cent believing that home prices will be higher in six months. Another 20.06 per cent think they will be lower while 43.95 per cent are expecting them to remain the same. Confidence is highest in Ontario and B.C. and lowest in the Prairies.
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