Hockey’s back!
And I’m not talking about the NHL… although it’s back too… Let’s Go Red Wings!
I’m talking about Minor Hockey.
My 5 year old just started up again.
And this year, we have early morning 7 am practices.
Something about arriving at the rink before the sun comes up… it just feels very Canadian, lol.
As somebody whose parents never let them join hockey as a kid… this is a whole new experience for me… and I’m loving it!
So is my son. He thinks it’s so cool that we get to leave the house before his sisters are even awake.
We’re only in week 3, and I have a good feeling this early-morning practice novelty might wear off soon, lol.
But for now, I’m embracing it. 😊
Something else I’m trying to embrace is all the new housing and mortgage policy changes.
These days it seems like every other week, new government policy is being rolled out, to help the housing market.
And rightfully so… the one thing we can all agree on is that the housing situation in Canada is a disaster!
What I’m not sure everyone will agree on, is the policy response to this disaster.
Here’s the most recent:
To summarize the actual policy:
Beginning January 15th, Canada will now allow 90% LTV mortgages, insured by CMHC, on homes valued up to $2 Million, if you decide to add a secondary suite to that home (can total up to 4 units). This can also be amortized over 30 years.
To qualify, you must already own the home, and one of the units will need to be occupied by either the borrower/homeowner or a “close relative.”
My personal opinion… this is a pretty significant policy change!
Is it a good policy change? It depends who you ask…
My initial thoughts are that it doesn’t really help those looking to achieve homeownership in Canada for the first time.
It also doesn’t have a big impact on larger, experienced developers.
But it’s a game changer for those who already own homes. Especially the INVESTORS.
Intended or not, this is a policy the real estate investing community will applaud.
And perhaps a lifeline they needed, as there are many investors that are sitting on properties right now where their rent doesn’t cover their monthly expenses.
As somebody in the mortgage industry who deals with a lot of investors, I’m okay with this policy change.
As a Canadian taxpayer, and somebody who would like to see everyone have an opportunity to own a home… I’m not as excited about this change.
Our government is effectively giving out government-insured construction financing so amateur builders and investors can build 4-plexes.
They are framing this as a policy intended for homeowners, but the average homeowner isn’t going to tear apart their home to build and move into a small apartment in a 4-plex.
And as for the requirement that, “the borrower or a close relative occupy one of the units.”
This is just window dressing. Creative investors will certainly find a way around this requirement.
This is to make it look like they are helping households rather than helping to fund investors.
The reality is that the investor can say they are going to “occupy” one of the units, but once they get their 90% government-insured mortgage; nothing stops them from renting that unit.
Building a 4-plex and making the numbers work is extremely hard. If it were easy, a lot more people would be doing it.
Our government is handing out cash so amateur investors can try to become builders; Many will fail, and taxpayers will be left to cover the cost of their steep learning curve.
Even if some amateur builders can get a 4-plex built within a reasonable budget there is almost a 0% chance it will cover its debt servicing costs with only 10% down.
Allowing a government-insured 90% LTV mortgage on a 4-plex is a program designed to fail because the average investor will need more equity in the project to have a reasonable debt coverage ratio.
I recognize that I probably sound super negative right now… but I just can’t see how this policy change moves the needle in any meaningful way, when it comes to addressing the core problem:
HOUSING AFFORDABILITY!
With that said, the devil is in the details, and all of those details have not yet been provided.
Those details should become available over the coming weeks…
Perhaps the government is actually two steps ahead and has already put measures in place to combat all my concerns.
Regardless, the big picture takeaways for me, are this…
And it’s something I’ve said many times over…
- Our government is going to do whatever it can to keep the real estate market afloat.
- Owning a single-family home in Canada is only going to get harder and harder.
I’m curious to hear how others interpret this new policy change. Feel free to reach out to discuss.
Regardless, we will keep on top of this, as more details on the program are provided.
Until next time,
Vince
