The tighter mortgage rules introduced by Finance Minister Bill Morneau on October 3 were intended to moderate the supposed negative impact of foreign buyers on Canadian real estate, but a veteran observer argued that the regulatory changes would serve a more vital function: shielding the national economy from the worst effects of a housing crash.
“Overall, these measures should reduce the risk of a knock-on to the Canadian economy from a possible correction in Vancouver and Toronto,” BMO Capital Markets senior economist Sal Guatieri said right after the announcement, as quoted by the Financial Post
“There’s enough [in the new rules] to slow the markets — especially foreign demand in those markets,” the analyst added. “But what these measures will also do is reduce the risk of a correction down the road should prices in those two cities continue to rise at double-digit rates.”
Guateri’s commentary joined a growing chorus of support for the new measures, which include the closing of tax loopholes for capital gains exemptions on principal residence sales; increasing mortgage insurance eligibility requirements (even for borrowers who have large down payments); and the consultation of stakeholders to ensure the proper distribution of risk (including risk sharing among lenders).
The new rules won’t prove to be a hindrance to Canadian companies who are looking at hiring foreign talent, industry players assured.
BC Tech Association president/CEO Bill Tam stated that he and his organization are anticipating no problems stemming from the tightened rules.
“I think anything that provides further stability in the market — where we can actually sort of ease the affordability challenge — is probably something in the long-term that benefits the tech sector here, and probably on a national basis,” Tam said.
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