The latest numbers from the Real Estate Board of Greater Vancouver could have far-reaching political implications.
The REGVB has reported that July sales were the lowest in this month since 2000.
May and June sales volumes were also at decade lows. And if this continues, it will create a great deal of pain for real-estate agents and developers, who make their living by closing deals.
Lenders also expect to be repaid for financing projects, but it’s hard to collect if the borrowers aren’t generating sufficient revenue.
And that’s where the politics comes into play.
The Conservative government has repeatedly reduced the mortgage-amortization period, dropping it from 40 years to 35 years to 30 years, and finally, to 25 years.
Many potential first-time buyers, in particular, have trouble affording a home in Greater Vancouver when they have to repay their loans within 25 years.
Senior bankers have been cheering on Finance Minister Jim Flaherty, supposedly because they are worried about a housing bubble.
The reality is that because banks also own investment dealers, their CEOs would prefer to see more Canadian money flowing into the equity markets rather than into real estate.
That’s because the investment side of the financial-services business generates fatter profitsâ€”most of the timeâ€”than boring retail banking and those unglamourous mortgages.
In addition, chartered banks are not competing with credit unions to nearly the same degree on the investment side in comparison to the mortgage market.
So by shortening the amortization period to 25 years, Flaherty is, in effect, shifting financial resources away from real estate and into paper assets.
If the housing slowdown continues, don’t be surprised if we start hearing about financial troubles in the credit-union sector.
That’s not Flaherty’s concern because credit unions are regulated by the provinces.
If you have any real estate questions or if you are thinking of buying or selling your home, please contact James Louie Chung, Metro Vancouver REALTOR® — Real Estate Agent at [email protected] or call / text ( 6 0 4 ) 7 1 9 — 6 3 2 8 today!
Source, Image: Straight, Design.Shuffle