[Newsbot]

Title: Ottawa announces new minimum down payments for homes over $500K
Category: Business
Posted By: N_Fiddledog
Date: 2015-12-12 01:01:47
Canadian

[Freakinoldguy]

This my look like a good idea at first glance but it's definitely going to destroy any hopes new home buyers in the most expensive markets have of getting their foot in the door.

By the time first time buyers save enough to make the larger down payment the house prices will have risen high enough to make that payment to little.

Ottawa would have been better off to have attempted to regulate foreign ownership in the housing market, especially the absentee owners. Once people from other countries realised they couldn't make a buck by sitting on Canadian real estate or it'd cost them to much they'd dump it which would go along way in bringing the prices down and back more in line with where they should be.

$1:

The average price for detached homes in Greater Vancouver was $952,809 higher than the average price for condos last month, compared with a gap of $771,298 in August, 2014.

$1:

The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core last year in November was $558,600. The benchmark value for the same home in November 2015 has increased by 9% to $608,600.

$1:

The median sale price for single detached homes in Toronto was up 10.7 per cent on a year-over-year basis to $670,000 in the third quarter of 2015. This was the second highest median price on record.

So maybe someone could explain to me how an increased down payment is going to keep up with house price increases of that magnitude.

[raydan]

The change isn't much... if you buy a $600K house, you need $5K more down payment than before, $25K more for a million dollar house.

[andyt]

IF thinngs are that tight for a first time buyer, that they can barely afford 5% down, maybe they need to set their sights lower and buy a condo first. Median price, even in Vancouver, below 5K. Then, once they are in the market for a bit, the down payment on a house won't be a problem. Few first time buyers can afford a house in Vancouver anyway. This protects the govt CMHA when the inevitable correction shakes our people who are just hanging in by their teeth.

As for regulating the foreign buyers, those are mostly going in for the high end stuff, well north of 1 million, where regs already require 20% down, and most of these buyers don't need a mortgage - that's the whole point of parking your money. I do think we should have restrictions, a la Australia. But then all the well ensconced boomers will scream bloody murder as their house values drop, and their kids will scream bloody murder because their parents can no longer use their house equity to help the kids get in the market. But the number one headline would be "think of the poor seniors".

[Freakinoldguy]

andyt andyt:

IF thinngs are that tight for a first time buyer, that they can barely afford 5% down, maybe they need to set their sights lower and buy a condo first. Median price, even in Vancouver, below 5K. Then, once they are in the market for a bit, the down payment on a house won't be a problem. Few first time buyers can afford a house in Vancouver anyway. This protects the govt CMHA when the inevitable correction shakes our people who are just hanging in by their teeth.

As for regulating the foreign buyers, those are mostly going in for the high end stuff, well north of 1 million, where regs already require 20% down, and most of these buyers don't need a mortgage - that's the whole point of parking your money. I do think we should have restrictions, a la Australia. But then all the well ensconced boomers will scream bloody murder as their house values drop, and their kids will scream bloody murder because their parents can no longer use their house equity to help the kids get in the market. But the number one headline would be "think of the poor seniors".

If you look at housing trends single family homes rise exponentially faster and higher than any other form of dwelling. So that means if you buy a Condo for 400 and it's value rises by 5% you'll still be far behind financially when it comes to buying a single home for 500K which has risen by 10%.

The problem isn't just the cost it's the disparity between the types of housing so, if you're going to be paying a princely sum for a mortgage you're much better off to be paying it for a single family dwelling which will gain in value much more quickly than a condo or townhome.

Plus when you own a condo or townhome you're going to be paying strata fees which isn't figured into the down payment cost of a home, but just on the mortgage. Then when you figure all the costs of these cheaper housing alternatives it's almost as much as you'd be paying for a mortgage on a single family dwelling.

So, this 5% is going to be a huge stumbling block when it comes to first time home buyers in expensive markets because if they get into a condo or townhome they'll likely never get out unless them move out of the area.

[andyt]

Freakinoldguy Freakinoldguy:

andyt andyt:

IF thinngs are that tight for a first time buyer, that they can barely afford 5% down, maybe they need to set their sights lower and buy a condo first. Median price, even in Vancouver, below 5K. Then, once they are in the market for a bit, the down payment on a house won't be a problem. Few first time buyers can afford a house in Vancouver anyway. This protects the govt CMHA when the inevitable correction shakes our people who are just hanging in by their teeth.

As for regulating the foreign buyers, those are mostly going in for the high end stuff, well north of 1 million, where regs already require 20% down, and most of these buyers don't need a mortgage - that's the whole point of parking your money. I do think we should have restrictions, a la Australia. But then all the well ensconced boomers will scream bloody murder as their house values drop, and their kids will scream bloody murder because their parents can no longer use their house equity to help the kids get in the market. But the number one headline would be "think of the poor seniors".

If you look at housing trends single family homes rise exponentially faster and higher than any other form of dwelling. So that means if you buy a Condo for 400 and it's value rises by 5% you'll still be far behind financially when it comes to buying a single home for 500K which has risen by 10%.

The problem isn't just the cost it's the disparity between the types of housing so, if you're going to be paying a princely sum for a mortgage you're much better off to be paying it for a single family dwelling which will gain in value much more quickly than a condo or townhome.

Plus when you own a condo or townhome you're going to be paying strata fees which isn't figured into the down payment cost of a home, but just on the mortgage. Then when you figure all the costs of these cheaper housing alternatives it's almost as much as you'd be paying for a mortgage on a single family dwelling.

So, this 5% is going to be a huge stumbling block when it comes to first time home buyers in expensive markets because if they get into a condo or townhome they'll likely never get out unless them move out of the area.

OK. But blaming the foreign investors won't cut it. They go for the high end stuff out of reach of ordinary folk anyway. Metro Vancouver has huge in migration numbers, limited land base because of mountains, sea, and agricultural land. We could stop foreign investment cold and this would still happen. As in Europe, people are going to have to get used to raising kids in multi-family dwellings (ie townhomes) unless they want to spend hours commuting, and even that is becoming more expensive. Vancouver is a top world city for desirability, we keep bringing in 1/4 million immigrants a year, most of which want to live in Vancouver or Toronto.