Wednesday, July 9, 2008

Canada Wakes up....Is it too late?

As posted in the comments section(h/t to bad) and noted at other places, the Canadian government has finally woken up and is trying to do away with the 40 year mortgages, as well as the zero down mortgages that are backed by the government (via CMHC and others). They'll also enforce more rigorous documentation standards.

They specifically mention that this is being done to "reduce the risk of a U.S.-style housing bubble developing in Canada." If you ever wanted a classic example of reactionary measure taken by bureaucrats, this could be it. The time to do this was in 2005 and 2006 when the mad rush was already reaching its zenith in Alberta and BC. Or even in 2007 when the frenzy was near its peak in Saskatoon/Regina. But in 2006, they were cheer leading the 'affordability paradigm' and passing laws to provide 40 year mortgages with zero down payment.

And while they abetted the bubble by offering these products, they are going to help deflate the bubble by eliminating some of these products from their offerings.
I'm pretty sure that this is only going to reduce the pool of buyers that could have otherwise obtained financing on on overpriced Edmonton condo using zero down, no document, 35 year term with credit score of 550.

How much impact will this have on Sales in Alberta? And to prices?
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