Are we all actually real estate addicts? Image

Are we all actually real estate addicts?

By Sam R on May 30, 2017

Interesting read by Ian McGugan in the Globe and Mail’s Report on Business this week: “Face it, Canada — you’re a real estate addict, and no one wants a cure.”

As the percentage of Canadians who own their own homes hits 70%, the majority of the population is hoping for a continued meteoric rise in house prices, he argues, and why shouldn’t they?

There’s a heck of a lot of potential profit in it for them. While our politicians “devise half-hearted, largely cosmetic measures that might cool the madness by half a degree,” we continue to shelter capital gains on principal residences, insure small down payments through CMHC and allow first-time homebuyers to use their RRSP’s to get onto the property ladder.

If we were serious, we would be discouraging first-timers, demanding larger down payments and taxing profits. But any politicians who promised to do anything that might reduce prices by 20% would be “slashed to shreds by mobs of hedge-clipper-wielding homeowners.”

As households take on more and more debt hoping their home values will grow their wealth, we open ourselves up to the possibility of recession and a slow recovery. And like any addict, he says, the first step is admitting we have a problem.

What do you think? Will we ever want to find a “cure”?  Or do we just love the crazy ride too much and want to hang on as long as we can?

Buying a home and getting a mortgage

CMHC announces Q1 average loan amount

CMHC released its first quarter report yesterday, saying that the organization provided more than $1.5 billion for housing programs on behalf of the federal government. It insured more than 48,000 units nation-wide, with total insurance-in-force of $502 billion as of March 31st; their legislated limit is $600 billion. The Government of Canada will be receiving a $145 million dividend as the sole shareholder.

In spite of warnings about large debt loads, the overall arrears rate for CMHC-insured homeowners is a measly 0.32%, and the average equity in insured homes is 35.2%. The average loan amount was $260,826. From this perspective, it seems like the market is pretty well balanced.