Interesting read by Ian McGugan in the Globe and Mail’s Report on Business this week: “Face it, Canada — you’re a real estate addict, and no one wants a cure.”
As the percentage of Canadians who own their own homes hits 70%, the majority of the population is hoping for a continued meteoric rise in house prices, he argues, and why shouldn’t they?
There’s a heck of a lot of potential profit in it for them. While our politicians “devise half-hearted, largely cosmetic measures that might cool the madness by half a degree,” we continue to shelter capital gains on principal residences, insure small down payments through CMHC and allow first-time homebuyers to use their RRSP’s to get onto the property ladder.
If we were serious, we would be discouraging first-timers, demanding larger down payments and taxing profits. But any politicians who promised to do anything that might reduce prices by 20% would be “slashed to shreds by mobs of hedge-clipper-wielding homeowners.”
As households take on more and more debt hoping their home values will grow their wealth, we open ourselves up to the possibility of recession and a slow recovery. And like any addict, he says, the first step is admitting we have a problem.
What do you think? Will we ever want to find a “cure”? Or do we just love the crazy ride too much and want to hang on as long as we can?
CMHC announces Q1 average loan amount
CMHC released its first quarter report yesterday, saying that the organization provided more than $1.5 billion for housing programs on behalf of the federal government. It insured more than 48,000 units nation-wide, with total insurance-in-force of $502 billion as of March 31st; their legislated limit is $600 billion. The Government of Canada will be receiving a $145 million dividend as the sole shareholder.
In spite of warnings about large debt loads, the overall arrears rate for CMHC-insured homeowners is a measly 0.32%, and the average equity in insured homes is 35.2%. The average loan amount was $260,826. From this perspective, it seems like the market is pretty well balanced.