Daily Market Update

Consumer confidence defies the stats… Vancouver edges towards taxing vacant homes… When is a mortgage too big?...


Consumer confidence defies the stats

With the latest figures from CREA showing that house prices increased again in August; a 2.1 per cent rise year over year; you might expect that consumer confidence in the housing market would also be high but it’s not. In fact the weekly barometer of confidence published by Bloomberg Nanos shows that expectation of continued price rises is flagging and is now at its lowest point since April. In July the survey recorded a record high with 47 per cent of respondents believing that there would be house price rises in the next six months; last week that figure was at 38 per cent. The majority, 48.1 per cent, think that prices will stay the same. Despite these figures, the overall level of confidence in the economy was higher, while confidence in job security and personal debt was down. Read the full story.


Vancouver edges closer to tax on vacant homes

With a mayoral election looming there could be consensus on the hot topic of vacant housing in Vancouver. The idea of a tax on those who buy property in the city and leave it vacant was proposed by candidate Meena Wong who moved here 34 years ago from Hong Kong. She may not be the favourite to win the election but her ideas have appealed to those concerned about rising prices in the city and foreign investors’ role in the hot market conditions. Now other mayoral candidates have expressed interest in the idea, although they suggest more data would be required to get a clear picture of the situation. The chief economist for the BC Real Estate Association says there are a lot of unanswered questions about the idea and is not sure that it would yield much in the way of funding for affordable housing; a key part of the proposal. A scheme in London, England which allows councils to charge a 50 per cent premium on vacant properties after two years has seemingly done little to dissuade foreign investors leaving property dormant. Read the full story.


You can get a big mortgage, but should you?

We know that prices are increasing faster than incomes, and we know that market conditions are attracting people to become owners, but are too many people overstretching their household finances? Writing in the Huffington Post, accountant and trustee in bankruptcy David Hoyes asks how much mortgage is too much risk. He says that affording monthly payments, including all the associated costs, is one part; equity in the home is another. Analysing the data from bankrupts, Moyes says that most have high ratio mortgages, with over 90 per cent having a mortgage debt at least 80 per cent of their home’s value, 70 per cent had 10 per cent equity or less and a staggering 64 per cent had no equity in the home at all. He suggests that anything below 10 per cent equity puts owners at high risk of insolvency with little room for manoeuvre if things go wrong. He is calling for CMHC backed mortgages to require a 10 per cent down-payment rather than the current 5 per cent requirement. Read the full story. 

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