Finance Minister Jim Flaherty announced this past week that effective July 9, 2012 CMHC mortgage insurance will only be available on mortgage amortization periods to a maximum of 25 years from the current 30 years. Furthermore, home equity lines of credit (HELOC) will be limited to a maximum of 80 percent assessed value, down from the current 85 percent.
Considering that household debt levels continue to increase, public policy changes such as these, in an effort to slow down borrowing, should not come as much of a surprise. Although these changes may be much needed to help slow down the already overheated Toronto and Vancouver housing markets their impacts will be felt in all regions, including Alberta.
What makes things interesting for many of our clients in the Alberta Residential Real Estate Rental Market is that this tightening of mortgage lending comes on the heels of Alberta experiencing its second highest level of inter-provincial migration in history during the first quarter of 2012, gaining 13,400 new residents. A double bonus for landlords; a rising population along with more challenging borrowing conditions, leading to many more of these individuals having no choice but to rent. Economics 101; along with rising demand for rental housing will come higher rental prices.
The province’s population as of April 2012 was 3,847,119 – an increase of 2.4% from a year ago. With an unemployment rate of only 4.5% and labour shortages affecting many business sectors, it’s anticipated that Alberta will continue to attract many more of the unemployed or underemployed from elsewhere in Canada whom can unfortunately anticipate paying higher residential rents upon arrival.