Effects of Gov't Getting Out of CMHC on Comox Valley Real Estate

Posted: May 21, 2012

AJ Summary: If Government is no longer involved in mortgage insurance and it's left to private companies that may (likely will) charge higher fees and/or require more stringent lending practices making it more costly for buyers with smaller down payments (often first time buyers) to get into (or back into) the real estate market, more people will continue to rent. Affect on (Comox Valley) house values: as long as inventory remains stable, investors in real estate will benefit from strong rental incomes. Bottom line: if you're thinking of getting into (/back into) the housing market, it's a great time to do it while prices, interest rates and values are relatively low. It doesn't even matter if you live in the property or not i.e.: rent elsewhere if it makes more sense, but do own some real estate! If you're not sure what the best options are for you, ask us... we want what's best for you and believe in making a difference through an Empathy-Driven Economy! (Mike Klingler) 

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The following is taken from an email received from John Hudey, RBC Royal Bank john.hudey@rbc.com:

The government could eventually remove itself from the mortgage insurance game -- an assertion Jim Flaherty reiterated Wednesday, only weeks after becoming what may be the first finance minister to seriously suggest it.

"Is it inevitable that the government, the people of Canada, will always own the residential mortgage insurance company?" Flaherty told the Senate banking committee “The answer to that is no, it's not inevitable that that will be forever owned by the people of Canada because it's not an essential service.”

The hint of sorts follows on the heels of another dropped at the tail end of April.
"I think there is a role to regulate but whether we, the Canadian people, have to be the owners and shareholders of a financial institution to do this is a question,” Flaherty told reporters. “Over time, I don't think it's essential that a government financial institution provide mortgage insurance in Canada.”

Wednesday’s comments amplify speculation that the Conservatives are intent upon eventually creating a CMHC that operates entirely without government backing. Flaherty is also echoing the suggestions of economists from the right-leaning CD Howe Institute, long-time advocates the government abandon its role as CMHC back-stop.

That kind of step back would end the Crown Corp’s six-decades-long history in that position at the same time, charge some brokers, threatens the ability of qualified Canadians – especially first-time buyers -- to get into their own homes.

To the extent that move makes it harder for Canadians to buy, say analysts, is the extent to which landlords will benefit from an expansion of the rental market.