CMHC - Liberals Recent Changes to the Rules

The challenge of bubbles forming in the Real Estate market is very difficult to regulate. CMHC and other countries’ equivalents have errored in that they have elevated both confidence of lenders and the availability of credit, thereby, to some degree distorting the market. There is no question that insuring mortgages reduces risk to lenders and by extension credit becomes both more widely accessible and more readily available. There is no question that Credit makes real estate more accessible, increases demand and elevates price.  It is more the case that government can exacerbate cycles in the real estate market, than it will ever be able to control cycles, or in any real way regulate markets away from cyclicality; save perhaps in the use of the draconian measures that were forwarded in the 1970’s by the then Liberal government in the form of wage and price controls – a disastrous policy foray that should be avoided with extreme prejudice.

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One wonders what affect the recent bid by the new government at cooling the housing market will really have. One understands, that while it will be sometime before there is upward pressure on interest rates, that interest rates will rise and inherent in that reality is a “national” risk of widespread over extension  amongst the population holding large mortgages. How is this policy going to help. This will have little or no effect on the overall challenge; policy only makes sense when policy is effective. The government would be much better off issuing a payment matrix at the time of mortgage issue that shows the payment at today’s rates and the payments at 2 point intervals to 18%, the highest number I remember from the dirty 80s. This policy is false comfort at best.

What values are being exalted at the chosen price point; it is okay to have a $500,000 home, but $650,000 home is different – how?

CMHC as an agent to help young people get their foot in the housing market is a good thing, CMHC should be aggressive as it can be in helping New Entrants to the market. CMHC has a limited role to play in some other areas of the market as well – but in the main, lending intuitions need to be exposed to the risk of their choices. We saw the disasters that emerged from other realties in last big downturn, when people become isolated from responsibility they become irresponsible.   

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Kamloops Real Estate - Market Perspective

FIRST DRAFT

I am presently in the process of initiating the construction of a apartment complex in Kamloops. This is a summary of my general perception of the market for prospective purchasers - marco picture / local picture. If anyone had input as to how they perceive its accuracy I would be most grateful.    

READING TIME: 2 minutes 

Real Estate Market Perspective – Apartment Complex Kamloops

The observations offered here are born of the assessment of the market in the context of the construction and sale of an apartment complex that accesses the upper market decile, with unit prices ranging from $350k to $850k. This complex’s interface with the market is somewhat less affected by the typical influencing factors in the market - employment, interest rates, general economy etc., because it is targeted, in large measure, to a discerning buyer at financial maturity – they are likely to buy a second residence or they are downsizing as a part of the typical life course.  

While this offering is to a degree atypical, there is opportunity to at the upper margins of the “investment market” to incite participation. The proponent senses if the investment market is provisioned for that a favourable outcome will ensue; so long as, the theme of the building is held paramount in terms of ensuring that there is compatibility with occupants and or the strategic allocation of space.

It is the sense of the proponent that we have a stable local market generally, that the local market has recently been trading more or less sideways against stable inventory and the local market is beginning to show some modest growth. The violent undulations of other markets and of the Kamloops market in the past, are less present in the contemporary Kamloops market, due in large measure to a more diversified local economy and perhaps, Kamloops is now becoming a moderate destination for lower mainland and prairie residents accessing the advantages of our market vis-a’-vis larger center’s markets.

This local market perspective is offered against the backdrop of sustained very low interests rates in the near and perhaps midterm, rising employment, a moderately favourable near term economic picture and an anticipated acceleration is to a strong and sustained up cycle in the medium and long term. This perspective is offered on the basis of central bank actions and a perception that, the cycles that were causal in generating the recession are correcting so as to effect a confluence of events to feed a super cycle beginning in and around 2018.

This general market picture bodes well for the proposed development. The larger units targeting to people downsizing from large homes are to a degree “isolated” from the market, given the type and nature of the purchaser. The smaller units targeted to a discerning lateral purchaser or “investor purchaser” land at the about the average home value in Kamloops and the upper end of the apartment market, this narrow market segment (market segment peculiar to this building) will be supported by an historical (20 year average) absorption rate of approximately 7 - 10 units per month, as well as, the favourable local and general market conditions.