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Clinton chats with News 95.7 host, Todd Veinotte, about the promises coming from the federal government parties to fix the housing crisis seen across Canada. We’re reviewing the possible restrictions on foreign property buyers, bans on blind real estate bidding, cutting of Canada Mortgage and Housing Corporation insurance rates and more!
Promises to fix the housing crisis – Canada’s Federal Election 2021. As heard on News 95.7 on August 26, 2021.
Don’t feel like watching the video? Check out the transcript below.
Federal government parties’ promises to fix the housing crisis
Todd Veinotte: [00:00:11.14] So the liberals new plan to curb soaring home prices includes billions of bucks in funding, tighter restrictions on foreign buyers. And some say it will not be enough to restore affordability in the Canadian real estate market
Again, some economists and housing experts, according to the Toronto Star. The story I’m reading and I’ve seen this elsewhere, I thought I’d reach out to our expert and find out what he thinks. Clinton Wilkins, of course, is our mortgage guru.
And to Clinton and I have a show here on News 95.7 airing once a month, or twice a month, actually, Saturday and Sunday. But Clinton, thanks for doing this today. Appreciate your time. Of course.
Clinton Wilkins: [00:00:47.92] Thanks for having me, Todd.
COVID-19 accelerated Nova Scotia’s lack of housing stock
Todd Veinotte: [00:00:48.82] Alright. So front and center is housing right now, right? Is that a good thing or a bad thing? What are your thoughts on that?
Clinton Wilkins: [00:00:55.78] Well, I think it’s one of the core issues, not just here in Halifax, but really across the country. As you know, you know, over the last 18 months or so, people’s living situation has changed. You know, a lot of us have been working at home. You know, we’ve been home more than we ever have been before. We’re maybe not going on vacation and traveling and eating out and shopping as much as we once were. And it’s definitely created some extra demand in the marketplace.
Also, you know, specifically in Halifax, we really had one of the safest and best places to be over the last 18 months that I think that was kind of on the forefront, you know, from across the country. And we’ve had a lot of immigration here in Halifax, as well as migration from across the country. And, you know, there’s really limited housing stock.
And I think, you know, we’re dealing with a little bit of a hangover from the last 20 years in Halifax. You know, at one time we had a moratorium on construction. And I think, you know, really we still have a lot of red tape here for builders and developers to, you know, get those shovels in the ground.
Part of the issue that we’re really seeing is, you know, at the municipal level and, you know, the province needs to work with HRM and the feds need to work with the province to really get to some of some of that housing stock moving. You know, the good thing is we have lots of land here.
Possible restrictions on foreign property buyers
Todd Veinotte: [00:02:23.05] Yeah, for sure. What about Justin Trudeau’s idea of restrictions on foreign buyers? Let’s deal with that first. Do you think that that’s a good idea? What are your thoughts on that?
Clinton Wilkins: [00:02:32.23] I don’t think is going to have a huge impact here in Halifax, to be honest. You know, we certainly do have some foreign buyers in Halifax. And really even on the South Shore, Todd, you think about, you know, foreign buyers maybe buying vacation properties. Will have a huge impact here in Halifax and Atlantic? I’m not certain.
I would say, you know, if we’re talking about investments and foreign buyers, I would say it might be more of a hot topic in more urban centers like Toronto, Montreal and Vancouver. I don’t know if that’s going to have a huge, huge impact here.
Todd Veinotte: [00:03:04.96] Yeah, I would. Do they even have the jurisdiction, the federal government? Is this not provincially regulated to some degree to the feds, can they regulate this industry?
Clinton Wilkins: [00:03:15.09] I think, you know, the feds can probably regulate anything that they really do want to. Whether it’s their jurisdiction or not, you know, it kind of comes top down. And at the end of the day, the land titles is a provincial purview. So, you know, the provinces would need to deal with whatever the feds decide is going to happen.
Possible ban on blind bidding and require more disclosure from realtors
Todd Veinotte: [00:03:39.15] What about bidding wars? That’s something else they talk about and that whole process. You feel that that could be tweaked, I guess, or regulated?
Clinton Wilkins: [00:03:48.03] And so I think that’s certainly interesting. Now, I’m not a licensed realtor, but I’m certainly familiar kind of with the process from the Nova Scotia Real Estate Commission and in Nova Scotia, we you know, we don’t share that information on, you know, what the prices are and what the bids are until, you know, there’s been a successful accepted offer and the conditions have been met.
Will it be better for buyers? Potentially. But I think that it may negatively impact sellers. And as we know, we’re in a seller’s market right now in Halifax. And, you know, homes are going for, you know, all time kind of record prices.
Our average home prices up over 30 per cent. So, you know, if we were to disclose basically what the offers were, would the prices be as exasperate as they are now? I’m not certain, Todd, but I do feel that it would potentially impact the sellers. And the one thing that we need to remember, if someone’s buying a home, you’re eventually going to be a seller as well. So right now, it’s basically fair market.
People are spending more than market value on homes, in some cases
And you know what we consider a property, you know, value is really what an agreed upon buyer and seller will, you know, meet in the middle. And that’s what they really feel the property values are.
Do we think maybe people are paying over what the market value is? In some cases, yes. And that’s really proven by, you know, an appraisal that would be required on the property. So we’re talking about mortgage finance and obviously that’s my purview.
Sometimes we need an appraisal. And sometimes the properties, even with the purchase price that’s agreed upon between the buyer and the seller, the appraisal comes in less than that purchase price. So what happens in those cases, Todd, is the buyer would either have to pay the difference in cash or sometimes in some cases, the buyers are able to go back to the seller and ask for a price reduction to come more in line with what the market values.
Cutting Canada Mortgage and Housing Corporation insurance rates
Todd Veinotte: [00:05:52.91] All right, something else that they’re talking about here is forcing Canada Mortgage and Housing Corporation (CMHC) to slash insurance rates by 25 per cent. And this spring, being a crown corporation, I guess they wouldn’t, they would have to comply. Is that true?
Clinton Wilkins: [00:06:09.73] Yep, they certainly are a crown corporation and their crown corporation that actually brings in a lot of revenue to the federal government. They have done transfers of billions of dollars into the federal government from basically their mortgage insurance and other programs that they run.
The challenge will be that I am not certain that the two other private corporations will be maybe as happy with that decision, not to speak for them. But there’s two other private corps, and one is called Sagen and the other one’s called Canada Guarantee.
And there is an alignment with what the premiums are with all three insurers. So if the CMHC, The Canadian Mortgage and Housing Corporation were to, you know, slash their premiums by 25 per cent for all their insurance products or for first-time home buyers, it would certainly have an impact on the bottom line.
And it will also impact, you know, obviously the bottom line of the private insurers. So that that’s going to be an interesting one. And that’s something that we’re certainly keeping an eye on. But I’m not 100 per cent sure that it’s going to really increase the affordability that significantly for first-time home buyers.
Access to more money might not help fix the housing crisis
Todd Veinotte: [00:07:15.62] Well, I guess when the higher the prices for the home, the savings would be relatable to that, would it not?
Clinton Wilkins: [00:07:24.91] Yeah, so with the way that the insurance work is, for example, if you’re going to buy a home and let’s say you’re going to buy a home for $500,000, the minimum down payment is five per cent to five per cent. $500,000 is $25,000. You would then pay mortgage insurance on the remaining amount. So on $475,000, you would pay four per cent for the insurance.
So in this scenario, you’d pay $19,000 for your high ratio mortgage insurance. If the feds were to reduce that by 25 per cent, obviously, you know, you’d $4,700, $4,750. It would make a difference to the end consumer, but is that going to make or break a transaction? In some cases, yes. But I don’t think it’s going to make a huge difference in increasing the affordability.
I think in some cases, first-time home buyers kind of buy at their max. Some maybe it’ll just enable them to buy a property that’s slightly more expensive. You know, in terms of, you know, what their mortgage payments are. I think an interesting thing to think about as well is that it’s the First-Time Home Buyers Incentive.
The First-Time Home Buyers Incentive
Todd Veinotte: [00:08:30.31] Yeah, I was going to ask you about that.
Clinton Wilkins: [00:08:31.51] It’s a shared equity program for first-time home buyers. And there’s some regulations in place that you can only in non big urban areas, you can only go up to four and a half or four times your household annual income. So basically that caps people out around kind of where the average house prices is in Halifax.
Clinton Wilkins: [00:08:52.57] It hasn’t really hit with first-time home buyers like the government thought it would. They actually even doled out all the money that they’d allocated for the program.
I think part of the issue is, you know, it works in the Atlantic and it likely works in areas of the prairies, but in more urban areas, the program really hasn’t worked as well. So I think that’ll be something interesting to see if the Liberals, you know, review if they get back into power.
You know, obviously they’re going to be making a lot of tweaks to the housing, and I think that they need to. I think one of the most exciting things that we kind of heard and in the announcement was that they’re going to help renovate and create, you know, 1.4 million new, 1.4 million new homes across the country. So I think increasing the housing stock is important.
And it’s not just maybe units for people to buy. We need rentals. We need, you know, affordable housing. We need single family homes. We need condominiums. We need a mix of housing, and to bring it back to Halifax:
We need more density on the peninsula. You know, everyone’s a super fan of density, but it is more affordable because we already have the infrastructure in place like transportation, water, power, things like that. But there’s a lot of land available in Halifax where we could build, you know, thousands of building lots.
“The challenge is the municipality is going to need to get on board.”
Clinton Wilkins: [00:10:13.04] The challenge is the municipality is going to need to get on board. They’re going to need to get on board in terms of water and sewer and transportation. And the urban sprawl is very expensive. I think it’s something that, you know, our new provincial government is going to need to work with the municipality to make happen.
And likely we are 20 years away from things balancing again. That’s kind of where my head is that. You know, we’re dealing with the hangover of 20 years ago and it’s going to take probably another 20 years to write itself.
Our population in Halifax is going to continue growing. So I don’t see a light at the end of the tunnel in terms of our current housing state. And I think it may further kind of be exacerbated by, you know, the population growth. And we need it here in Halifax. We need it in Nova Scotia.
You know, we always thought that we were going to have a declining population because our population was getting older. But I suspect, you know, in the coming years, our population is going to, our average population is going to continue getting younger, which is pretty exciting. It’s great for business. It’s great for the economy here. And, you know, the more people we have, the more services that we’re going to be able to have as well. So I think there are some exciting times on the horizon.
The most exciting thing for Halifax could be the promises for more housing units
Todd Veinotte: [00:11:24.95] Alright. So I guess the vibe that I’m getting from you is you don’t feel that these changes or these proposals that Trudeau’s ruled out here are going to have a huge impact in nature. And you feel it’s more directed towards or targeted towards some bigger areas like Toronto, Vancouver, Montreal. Is that accurate?
Clinton Wilkins: [00:11:43.76] Well, I would say they are probably in the same state that we are or worse. I think the one thing that may be most exciting in Halifax is creating the more units. So depending on kind of how many we get of 1.4 million and like new homes and new units, I think that’s probably going to be the most exciting, because I, I think the number one issue that we have here is housing stock.
Todd Veinotte: [00:12:10.03] Clinton, great stuff, as always, I appreciate your time and we’ll talk again obviously soon. Thank you.
Clinton Wilkins: [00:12:15.43] Thanks, Todd. Have a good day.
Todd Veinotte: [00:12:16.36] All right. Take care, Clinton Wilkins. He’s our mortgage guru. Interesting stuff. A wealth of knowledge, of course. Construction starts on Nova Scotia as First Cohousing project. We’ll talk about this when we come back.
If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.