Speaking of this, and following up the post that i960 made a while ago (https://www.elitetrader.com/et/threads/canadian-housing-bubble-thread.308528/page-5#post-4443577) about how BMO was going to bundle unsecured mortgages into debt to sell off, I came across this today. http://business.financialpost.com/i...s-plunge-as-reputation-and-funding-risks-rise Its hard to read given that they want you to pay, but this one line says it all. "...Ontario Securities Commission accused the mortgage lender of misleading disclosure after the company uncovered falsified income information on some loan applications and cut ties with dozens of brokers in 2014"
Our lending guidelines were very stringent and there were no shenanigans at all. Having said that we made a lot of exceptions on uninsured mortgages. We approved some pretty high Debt Service ratio's if it made sense and the client had other products with our bank. When it comes to insured mortgages there are no exceptions, CMHC is very strict.
I really have no idea where people are getting the money. When you consider that the mortgage should be maxed out at 30-33%, very few households should be qualifying for million dollar homes. I get that some are moving up and hence whatever they sell will sell for a high price, but still, considering the average wage in Canada is what, 50k, and household is maybe just a bit more than that... where is the money coming from? Even if a couple making 60k each, and hence 120k combined, the most they should be able to afford is some starter condo for 500k. There must be lots of rich people out there.
The younger people who were first time buyers were mostly getting down payments from parents... and parents get it from refinancing their homes. I would do deals where I would do a refinance for the parents for a down payment for the kids new house or condo. For income you can also say that you will rent your basement and we will use 50% of the rent to help you qualify. Even if you never end up renting it out. The appraiser just does a fair market rent assessment and we use that figure. This was very big in helping people qualify. Some lenders even allow people to use 100% of rental income to help with the qualifying. I am a millennial and I have lots of friends who got help from their parents to buy properties as well. Even my parents were trying to get me into this game too. In hindsight it would have been great to buy in the GTA 3-4 years ago but I am too debt averse and prefer to be liquid.
Well that explains it then. I don't understand though how these debt helper renters really help though. That money received should be claimed as income, for tax purposes, with hardly any expenses to go against it I think. Sure the tax might be 30% of the money you receive, so 60-70% can still go towards the mortgage, but I do think that if CRA really did their jobs, they would see lots of shady stuff going on with rental income.
Listen, I get you guys. Hell, I'm a buyer who is priced out myself. But do you guys know what you sound like? Like a permabear since '09. Sure, one day you'll get your 30% collapse or 20%, or 10%. After what? A 200, 300, 400% run up in prices? Look at the big picture. Just because you/us are averse to leveraging on debt, doesn't mean the other 90% of the local population is. And they are the ones who set marginal prices.
Many of my friends have parents that own their own home (its completely paid for)...homes that their elderly parents still live in since paying off the home in the 80s or 90s. That's a lot of wealth in the elderly community that's starting to be pass down to the kids (now adults). That's where the money is coming from because I see a lot of 30 to 50 years old folks buying these 500k - 1million dollar homes and I too wonder where they're getting the money from on their average salaries. My friends have stated its money given to them or inherited from their parents. Simply, there's a lot of rich elderly in Canada (at least here in Quebec). For example, when I arrived in Canada, the first thing I notice that was odd was a lot of my friends had parents with more than one property...most had 2nd or 3rd homes elsewhere such as a home on a lake, condo at a ski resort, home in some tourist community or whatever...all paid off. I've seen this before in the U.S. (suburbs of Chicago)...that old money...rich money from many wealthy property owners that are now elderly...passing the money down to the kids (now adults). Its nothing to be ashamed of...just lucky to be in that situation. One of my best friend's, his parents bought a 30k home in the late 60s while in their late 20's years old. Paid off the home in the late 80s and sold the home last year for +600k. Now the parents are moving into a retirement condo complex after giving him about +400k...they will spend their remainder retirement years living off their investments and pensions. Guess what, he's now looking to move out of his apartment into a +600k home and he's a manager at a small retail grocery store making about 35k per year.
It is a huge cash cow for Australian universities. Tertiary education is in a HUGE bubble, they are building the best buildings, amazing designs from internationally renowned architects , like Frank Gehry. Huge numbers of Chinese students also being sent to complete their secondary schooling here.
They think they know more about the Toronto market then they do. There are similar threads on this site about the "Canadian housing bubble" from 2010 and 2011. The last year or so is the first time Toronto home prices have truly spiked up versus a gradual climb from an overly cheap market in the 1990s. Supply is an issue prompting that spike. They say only 5-8% of our market is the speculators and foreign buyers. One interesting fact that came out today is that Toronto welcomes 80K in new immigrants every year, which creates a need for 30K in new rental property. But in reality, Toronto only creates 1.5K in new rental units every year. So that in itself explains why renting isn't the easy solution some outsiders think is out there. Most of the new places in Toronto are expensive condos in high rises that sell out years in advance; they are small units, more like an apartment then a home. Others may choose to commute into Toronto and live in communities quite far removed. However, I'm seeing now that prices in all the surrounding small cities are also up around 30% the last year. So capacity is a serious issue in terms of owning or renting anywhere beyond perhaps overpriced small condos in high rises.
This is covered in my previous posts: (Announcement containing the full text of the OSC allegations) https://www.elitetrader.com/et/posts/4444892/ (Market reaction and Cohodes interview) https://www.elitetrader.com/et/posts/4444972/ .