Quality bar raised in favour of new home buyers
torstar file photo
One of the great things about living in Canada right now is our healthy real estate market that makes buying a new home or condominium a great investment. There are a lot of tremendous housing and condominium choices available, and this competitive marketplace is ideal for buyers, who receive unprecedented value for their dollar. Condominium developers, for example, are offering unbelievable amenities and features to attract purchasers. The quality bar has been raised, and it’s all in your favour. This is a terrific time to buy, especially if you live in Toronto. As you most likely know, City Hall has approved a new land transfer tax on residential purchases that will kick in on January 1, 2008. If you buy before the end of the year, you can save thousands of dollars.
Many Canadians are wondering about the situation in the United States — whether the subprime mortgage lending problems there might affect the stability of our real estate sector. This is highly unlikely, as our Canadian industry is much better regulated.
Subprime is a word we seldom hear in Canada. It refers to unconventional mortgages offered for a limited time at rates below prime, after which they jump to higher than prime. In the U.S., subprime-focused companies have also been lending more than the value of the house. Their target market includes low-income individuals with poor credit ratings, who would most likely not otherwise be able to obtain a mortgage from a conventional lender like a major bank. The lure has included convincing subprime borrowers that when their interest rates jumped, their home would have increased in value so they could refinance.
Unfortunately, the tidal wave of subprime mortgages (20 per cent of U.S. mortgages in 2007, compared to only 5 per cent in Canada) backfired. U.S. housing prices started to fall, and borrowers found they couldn’t meet their now-double-digit mortgage interest rates. Foreclosures and mortgage delinquencies skyrocketed and many subprime lenders folded.
It’s so different here. Most of our mortgage lending in Canada involves prime lending. Plus, the few mortgages that are considered high-ratio, or obtained with less than 20 per cent down, have to be backed my mortgage insurance of the type CMHC offers. And Canadians cannot finance more than 100 per cent of a home’s value. Canada experiences ups and downs in mortgage rates, housing prices and mortgage delinquencies, but right now overall mortgage arrears are at near record lows.
If you find a condominium you love at a price you can afford, what are you waiting for? Figures have shown time and time again that in the long run, owning Canadian real estate is a sound decision in all economic climates — and you actually get to live in your investment!