A tale of property values and Quebec politics

A question I get asked about is whether or not what's transpiring in Quebec politics is affecting the value of your home and investment properties? I think it might be too early to answer that question given the upcoming election. Stay tuned folks...

As most of you are aware, in an attempt to cool market values in Canada the Federal Government has implemented a few mortgage changes. These changes have been happening the past couple years. I agree with some changes such as amortization and limiting lines of credit however it's too soon to comment about the impact of Quebec politics. Having said that, the Federal changes are working.

I believe that what the Quebec Government has been focused on unfortunately distracts the public attention away from the real economic issues facing the Province. Market values in the Greater Montreal area have slowed or adjusted in many cities. I think this was expected as I've seen bank evaluations drop over the past three years. The banks are definitely playing it safe especially with condo values. I agree with this conservative approach. The future is still uncertain. I'm not suggesting we will have a market crash after the Quebec Provincial election however I do think market values will continue to slow. We do need job creation and economic growth in Quebec above anything else.

Flaherty Announces New Mortgage Rules

Yesterday, Mr. Flaherty, Finance Minister,  made some aggressive changes to the mortgage rules in an attempt to slow down the rate that people are borrowing on home equity and to slow down the real estate market.
 

Here is a summary of the changes:

1) Amortization reduced from 30 down to 25 years on government backed mortgages (i.e. insured mortgages)
2) Max Loan To Value for Refinancing 80% of your home's market value
3) No CMHC backing for Properties over $1M (client must put down 20%)
4) Gross Debt Service ratio increased to 39% Total Debt Service ratio remains at 44% 

Please note as a repercussion of this announcement today the banks will start to implement the new rules over the next couple of weeks to meet with the July 9th deadline. Mortgages that have already been approved and are in the process of being funded will not be affected by these changes however any future transactions will have to be qualified under the new rules.

The question is: What does this mean for the average Canadian? The government believes that this will help halt an ever increasing housing market and will stop Canadians from using their homes as ATMs to pull cash out of equity.

It remains to be seen if the banks will continue to offer 30 and 35 year amortizations on non government backed mortgages. The government believes that only 5% of Canadians will be affected by these new rules.We did have some good news today as well with respect to these changes. Canadians will still be able to secure a home with only a 5% down payment as well as the increase in the GDS ratio will allow more room for certain families to qualify for homes.

As always I am available to answer all your questions please feel free to contact me. Have a good long weekend everyone.