Canadian Condo Buyers At The Beginning Of The Pandemic Now Nearly Underwater

Posted by BetterDwelling

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First-time homebuyers were warned at the beginning of the pandemic, and a lot didn’t listen. Now some are seeing exactly what the Canada Mortgage and Housing Corporation (CMHC) warned. Canadian Real Estate Association (CREA) condo apartment price data shows a few markets have seen buyers lose a chunk of their down payment. There are some exceptions, but two of the largest condo markets were not.

The Calculations 

Today we’re looking at two calculations, the return on investment on a 5% down payment and estimated equity. The first, assumes a 5% down payment because it’s the demographic the CMHC warned  not to buy. The return is the change in condo prices from April, minus cost of mandatory insurance. This number excludes a number of costs, notably land transfers and closing. Returns are therefore higher than reality in these estimates.

The second number is an estimate of how much equity the condo buyer has remaining. To get this, we’re taking the current benchmark value, and subtracting the mortgage. We then remove principal contribution to the mortgage, factoring a 2% mortgage rate. The result is the estimated equity a condo buyer has, after the above costs with a few months payment…CLICK for complete article