With Finance Minister Bill Morneau just introducing preventative measures aimed at reducing the risks facing the Canadian housing sector, industry players and finance experts weighed in on the regulatory changes.
“The measures … should help to reduce the risk of a housing-market correction in Vancouver and Toronto, and a broader retrenchment in Canadian household spending arising from elevated debts,” BMO Capital Markets senior economist Sal Guatieri wrote in a research note, as quoted by Bloomberg
Morneau’s measures include increasing mortgage insurance eligibility requirements (even for borrowers who have large down payments); the closing of tax loopholes for capital gains exemptions on principal residence sales; and the consultation of industry stakeholders to ensure the proper distribution of risk (including lender risk sharing).
“As regulation accelerates, concerns will probably rise, justified or not, that the so-called bubbles in Vancouver and, to a lesser extent, Toronto will burst as opposed to slowly deflate,” Manulife Asset Management (Toronto) Frances Donald warned. “We can probably expect an initial knee-jerk reaction in the housing market data, as potential buyers question whether there’s more to come.”
However, other observers remained skeptical of the cooling effects of the tighter rules.
“Non-Canadian residents’ ownership of residential real estate in Canada is a factor in the demand for real estate, but it’s not the only nor the most significant factor. By far, the lion’s share of demand is from domestic-resident buyers,” Sotheby’s International Realty Canada president/CEO Brad J. Henderson said.
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