Surprise! We have a Federal Election coming up on September 20th 2021. That’s only 35 days! Incredible when you compare Canadian to US elections how quickly they happen here, isn’t it?
In this post I am going to review and comment on the Conservative Party Platform, specifically to comment on their HOUSING PLAN. This is not a PRO- or ANTI- post. This is just showing you what this party promises to do (and what I think about what they promise to do). If you’d like to read the entire platform, you can find it here.
FIRST let’s start with the opening salvo:
We are off to a great start! This party actually recognizes that SUPPLY is one of the biggest problems in our housing market, and one of the main drivers of house prices in the past 20+ years! Ok, but what are they going to DO about it?
Build 1, 000, 000 homes in the next 3 years. A very ambitious plan, but one that makes sense. Build more houses, have less bidding wars, drive up prices less, and ta-dah, you’ve created at least some sense of a balanced market. Here’s HOW they plan on doing this:
Great. So they’ve built 1,000,000 homes in 3 years (a very, very lofty ambitious goal. Questions: Where will these homes go? Which areas will get them? Who will build them? Will local municipalities fast-track approvals? Who the hell knows! 1,000,000 in 3 years is the goal and gosh dangit, they are going to have to do it one way or the other even if Erin O’Toole has to pick up the hammers and nails)
ONE THING I LOVE HERE: “Allowing to defer capital gains tax when selling a property and reinvesting it into another rental property”. I’m sorry, but that is absolutely amazing. LOVE this idea!
What ELSE will the Conservative Government do to address high house prices?
- Go after MONEY LAUNDERING (good):
- Put a 2-year ban on FOREIGNERS BUYING IN CANADA
Pretty good, actually. I don’t have a problem at all going after money laundering, and I don’t have a problem going after foreign buyers. We should not allow foreign buyers to be able to dump their money here and sit on empty properties. The OPTICS look bad, and it does not help supply, and does not help Canadians who want to live here. Fine, no problem.
Now HERE is where the JUICY part comes. M-m-m-m-moooooortgages!
- YES!!!!! YES!!!!! YES!!!!! Brilliant!!!! Let’s explore the idea that we can offer a 7-10 year FIXED-RATE mortgage and REDUCE the stress-test if you opt for this kind of long-term loan. Let’s INCENTIVIZE these loans (now I’m getting VERY aggressive) by rewarding people who stay in these terms for the duration, without moving or refinancing. Right now, a 7 year rate is approximately 2.84%. Why the hell are we going to stress-test at 5.25% a borrower who is paying 2.84% for SEVEN YEARS? A 10-year rate is 3.14%. My thought; The LONGER the term is, the LOWER the stress-test should be. (Remember, 6+ year mortgages are still subject to penalties, but, at the 5 year and 1 day mark they are 90-days’ interest vs the dreaded IRD or INTEREST RATE DIFFERENTIAL).
- YES YES YES YES YES!!! COMMON-SENSE! I can’t beleive I’m saying this but YES! Why the hell are stress-testing people who are already in the club of home ownership, and not applying rules that were applicable when they purchased their homes? FACT: You CAN avoid the stress test with some lenders if you purchased before the changes and with credit unions but not with everyone
- OMG. Give this man the Prime Minister’s job today! (if you vote based on one issue alone). Did the Conservative Party just propose an INCREASE on the CMHC rule of $999,999.99 house price that is so outdated that it’s like a bag of stale milk in the fridge that stinks up the whole house? Yes! Why are we capping amazing borrowers who can’t save fast enough, and forcing them to buy $999K houses, when they can afford $1.5M houses, but they can’t find $300,000 as a down payment (but can save the minimum). Life is EXPENSIVE. Grad school, renting, having a family, all of these things COST a lot of money. THIS IS BRILLIANT, I’m sorry.
- This is not stress-test related. I work with small business owners, contractors and non-permanent employees and it’s not a stress-test issue at all. It’s a “do you know how to do the deal?” issue. The stress-test should not be applied differently to these types of workers, we should have MORE OPTIONS for these kinds of workers.
OVERALL, as a MORTGAGE BROKER, I can tell you that I would give this plan a solid A.
This is BY NO MEANS a recommendation to vote for the Conservative party, as we all know that the last 20 or so months have been a wild, wild time, and there are MANY more factors besides housing that should decide your vote. However, if you think housing is a very important decision point in this election, you should at least consider the potential effects of this plan and what it would do to gaining access.
Next post will review the Liberal, NDP and Green Party plans, as they become available.
Thanks for reading! Follow me on twitter @mortgagejake to give me the gears for why I love this plan.