December 16, 2024, was supposed to be the day when the Ministry of Finance released the "2024 Autumn Economic Statement", but early in the morning, news of the resignation of the Finance Minister was received. On the same day, I received a notice that the policy of exempting stress testing for refinancing, which will be implemented from November 21, 2024, will cease to be used from now on. The policy is only valid for 25 days. This reminds me of Luo Zhenyu’s concluding remarks in his New Year’s Eve speech in “Friends of Time” last year:The world is a grassroots team, but! I! No! yes!
If we want to watch a farce staged in the village, the Caotai troupe is enough: the actors are improvised, the stage is hastily set up, and everyone disperses at the end of the performance without leaving any thoughts. If we want to watch a large-scale opera with 100 people participating, it needs to be completed by a professional performance team in a grand theater, and the Caotai troupe cannot do it. The current Canadian government is just a grassroots team, with all kinds of clowns, you sing and I will appear. The macroeconomic policies formulated by the politicians of the Grassroots Team are changed day by day. They are easy to build and collapse quickly. However, our life plans cannot fluctuate with the macroeconomic policies formulated by the Grassroots Team. They must have a solid foundation. Policy changes will bring aboutThe turning of the wind, and our lives needtake rootOn fertile soil. Those who chase the trend have no sense of direction and are completely dependent on the direction of the wind, so their personal destiny floats with the wind; those who are rooted in providing high-quality products and professional services to others do not rely on the trend, never fantasize about getting rich overnight, work hard, pay taxes honestly, and use after-tax income to make long-term investments to balance their lifetime income, so that they can always control their destiny in their own hands.
first generation immigrants,take rootThere are three steps: 1. Complete immigration landing; 2. Find a job that can provide high-quality products and professional services to society; 3. Accumulate personal assets.In capitalism, if you want to survive and develop in the market, the first priority is to own personal assets, otherwise there will be nothing to exchange in the market.The wind blown by the government's grassroots team may bring opportunities or misfortune. People without foundation can easily get messed up in the wind. Private property rights are the basis for the survival of immigrants. No matter how strong the wind is, the foundation cannot be shaken. Regarding the advice on buying a house, no matter what the environment, I recommend "buy, buy, buy". Some people think this is deceiving, but readers who have practiced this principle know that regardless of the direction of the trend, "buy, buy, buy" as long as you are ready is the only correct real estate investment principle. This is the rational choice to respect the market and despise the trend.
The Ministry of Finance provides guidance every six months. Some housing and mortgage policies in the "2024 Autumn Economic Conditions Statement" are worthy of attention. Sales advertisements for some special properties in Chinese communities are also leading the trend, and they deserve vigilance. Real estate investors need to keep a firm foothold and understand the direction of the wind. Following the trend can get twice the result with half the effort. Seeing the essence of sales advertisements can avoid being swayed by unhealthy trends.
01 Major good news for second-hand housing
My public account article on September 19 this year"Fed's "aggressive" interest rate cut+ The “Boldest” Canadian Mortgage New Deal =? ? 》, carefully introduced the new housing loan policy that will be implemented on December 15th, just because he is worried about whether Trudeau’s grassroots team can persist on this big day. Fortunately, the Ministry of Finance’s website officially announced on December 15 that “the boldest mortgage reform in decades comes into force today.” The main contents of the New Deal are as follows:
For homebuyers with a down payment of less than 20%, the maximum house price will be increased from 1 million to 1.5 million; for first-time buyers of new or second-hand houses, or for non-first-time buyers of new houses, the maximum repayment period will be extended from 25 years to 30 years.
On the same webpage, the Ministry of Finance reminded the public of the following latest changes in mortgage policies, including that first-time homebuyers can withdraw 60,000 (previously 35,000) from their retirement account RRSP as a down payment. The annual contribution limit for the first-time home buying deposit account FHSA is 8,000, for a total of 40,000. To build an additional unit on their home, the homeowner can obtain an 80,000 renovation loan (previously 40,000). To build an additional owner-occupied unit, you can borrow 90% of the house price based on the market price after the addition. These two loan policies for expansion will take effect on January 15, 2025.
When first-time homebuyers face the above policy changes, they need to make some calculations and trade-offs. A family with an annual income of 200,000 yuan is buying a home for the first time and currently has a down payment of 90,000 yuan. Should it buy a house immediately after the policy changes? If you want to buy a house worth 1 million and want to make a down payment of 20%, you still need to save another 110,000 for the down payment, and there is no need to pay loan default insurance premiums. If you pay a premium of 37,000, you can buy a house immediately. Note thatloan default insuranceMortgage loan insurance means that the bank insures the loan to the insurance company. When the bank lends the loan, it immediately pays the insurance company a premium of 37,000. At the same time, the 37,000 is added to the loan principal and repaid in installments by the borrower. The borrower does not need to pay the premium in cash, or the premium is also borrowed.The beneficiary of loan default insurance is the bank. Once the borrower defaults, the bank will seek compensation from the insurance company. If house prices are on the rise, buying a house with a low down payment can take advantage of the situation. Extending the repayment period to five years means that borrowers with a down payment of less than 20% could only borrow four times their annual income, but this has now increased to five times their annual income. Families with borrowing capacity and confidence in the real estate market and their future income will choose to buy early; families with the opposite idea will continue to "wait." Many families who originally had insufficient borrowing capacity will see a significant increase in their borrowing capacity after December 15. There will definitely be some families who embrace this gift.
For investors, the New Deal will suddenly lead to the emergence of many competitors. Some families with insufficient down payments were originally not eligible to participate in the home-buying competition. However, due to the change in the competition system, originally unqualified players are now eligible to participate in the competition. Real estate investors are some of the smartest people in the crowd and know what to do now. For investors, the outlet provided by Caotai Team is worth pursuing.
02 Do you want to increase housing density?
People compete mainly for space, including physical living space and living space in the workplace.Houses are valuable human-made spaces and the most fiercely competitive commodity ever created. In addition to use value, properties in good locations have many other premiums. So people say there are three factors to consider when buying a house: location, location, location. If many people can live in the same location, the housing crisis can be solved. This is how people in the Caotai team usually think about the problem. As a result, the federal government, provincial governments, and municipal governments have continued to advocate that increasing residential density is an effective way to solve the housing crisis. Increasing residential density is a good thing for new residents, but not necessarily for existing residents. Therefore, the government has provided many stimulus policies in the hope of bringing existing residents into compliance.
At a recent event, a friend who works in architectural design introduced to me a design concept on how to convert an old dilapidated small property with a large plot into a five-unit multi-family housing. I asked, why unit 5? She said that only 5 units can apply for CMHC's low-interest loan. I checked and found a project called Multi-unit CMHC Standard Rental Housing. One of the loan conditions is to build at least 5 units of property. The loan does not require personal income support.Just look at the debt coverage ratio of the property itselfDCR, the definition of this concept is as follows. I personally think this is a policy that is ruining the community. If this trend is not stopped in time, special communities will appear where such properties are concentrated, and middle-class families will flee such communities. Another possibility is that few people responded to the policy and applied for such loans to destroy their living environment, making this policy, like many utopian socialist policies in the past, useless and shelved.
The government hopes that families will step forward, take on debt themselves, build additional properties with their own money, and pay for the government's policies that lack long-term planning. However, as a member of the community, do you want to increase the housing density in your community?
03 Is the CMHC MLI Select project an investment project or a charity project?
Advertisements for the CMHC MLI Select real estate project suddenly appeared in the Chinese community recently. I checked it out out of curiosity. You wouldn’t know if you didn’t check it, but when you checked it, you were shocked to find out that you really didn’t know that there was such a real estate charity project in Canada. This is a project that will start in March 2022, and it seems that there are already completed properties for sale. CMHC in the project name is a state-owned mortgage insurance company, MLI means mortgage loan insurance, select should mean "selected", and together they mean "State Mortgage Insurance Select Projects". How will the national team select projects deemed worthy of supporting with low interest rates and 50-year repayment terms? Let me explain it below using the projects being promoted by the Chinese community as an example.
There are three criteria for "selected": 1. Affordability; 2. Energy efficiency; 3. Accessibility. Each item must be scored, and the total score determines the "exquisiteness" of the "high-quality" property. The higher the score, the more discounts the property will enjoy. Accessibility has a minimum of 20 points and a maximum of 30 points; energy efficiency has a minimum of 20 points and a maximum of 50 points; affordability has a minimum of 50 points and a maximum of 100 points. The projects currently on sale in Chinese communities are completed projects with a down payment of 5% and a repayment period of 50 years. To achieve this discount, a minimum of 100 points is required. Assuming that accessibility reaches a full score of 30 points, energy efficiency reaches a full score of 50 points, and affordability reaches a minimum of 50 points, a total score of more than 100 points can be achieved. To achieve a minimum affordability standard of 50 points, 40% of the units in the property are required to be rented at a price lower than 30% of the local median renter income. The original text is minimum 40% of units at maximum 30% of median renter income. Taking Toronto as an example, the median household income is 85,000 yuan, of which the median income of renting households is 64,000 yuan. If a rental house is provided based on 30% of the latter's monthly income, the rent should be less than 1,600 yuan, and the low-cost rental period should not be less than 10 years. To rent housing with the highest energy-saving standards and the highest barrier-free standards in Toronto for 1,600 yuan is to turn Toronto into an ideal country or utopia. If in such a "high-quality" building, 40% of the units are rented at low prices, and the other 60% are rented at market prices, not to mention whether the buyers of this property can make a profit, in accordance with the principle of "people are divided into groups", whether they can be rented out is a question. Therefore, the best buyer of this "selected" project should be the government, using taxpayers' money for charity. This is not the case in reality,Developers who built such high-quality housing did not succeed in selling the project to the government. They had to find another way to sell it to the public, providing the public with an opportunity to participate in charity.
Conclusion
The outlet is used to intervene in the market, which may accelerate the market process or disrupt the market order. It is the east wind that promotes the market economy and can be harnessed; it is the west wind that blows towards the ideal country, which will eventually be defeated by the market and will not last long.I believe that believers in market economy have a keen eye and can identify policies that are beneficial to the market and take advantage of them. For example, the relaxation of the second-hand housing policy will intensify market competition and push up housing prices. The characteristic of pioneers is the courage to act. The outlet created by the Caotai team and carrying utopian ideals will not survive long in the market competition, and we cannot rely on it.
The Trudeau government is a grassroots team that constantly uses myths about utopias and utopias and various stupid tricks that damage the country's long-term economic development and social stability to cheat votes. However, more and more Canadians have seen the damage this grassroots team has caused to Canada, and these actors will fall off the stage one after another as the team's internal strife.
I have been searching hard for what is the basis for a life in a capitalist country, and how to take root in capitalism. Fortunately, the answers to these two questions were recently found in the novel Astra Shrugged:I will never live for others, nor will I ask others to live for me.In capitalist countries,Be self-interested and do things that benefit others, so that you can not be coerced by the wind and not be deceived by the Caotai team. I wish every reader who immigrated to Canada can live the life they want to be. The world today is a grassroots team, but! We! We! No! We are!
Henry Wang in Toronto on the evening of December 18, 2024