Is CAAMP’s Analysis Correct?

In recent weeks, the Canadian Association of Accredited Mortgage Professionals (CAAMP) has been sounding the alarm about the fallout a further round of mortgage lending tightening would have on the  Canadian economy.

We want the government to be aware of the economic and job contribution that housing and the real estate industry provide,” said CAAMP CEO Jim Murphy, coming off a second visit to Parliament Hill in as many months. ”CAAMP, based on current data and research, sees no need to further tighten or restrict access to residential mortgages at this time. We want to make sure key decision makers are aware of the importance of these issues and not take any measures that unnecessarily reduce housing activity thereby damaging the economy.” (More at

A new report was issued by CAAMP this week entitled, Employment Impacts of Housing  and Mortgage Activity detailing how the housing market has been a  “significant economic driver.”

While making assertions that, “rising home values lead to greater consumer spending, and thus, a stronger economy” it fails to really underpin the reason for the increased spending.

According to CAAMP’s research in 2011, it estimated that equity take-out by Canadian homeowners had amounted to $28.5 billion in the prior year. $11 billion was for debt consolidation and $3.5 billion was for investments allowing $14 billion for spending.

So while the housing industry added much in terms of employment growth, consumers were still borrowing huge amounts of equity in order to spend.

The report also estimates that only 2 to 3% of Canadian home sales nationally are investment properties and that the investment motive is “mild.”    Clearly, the author chose to ignore hotspots in Canada’s largest municipalities and the beehive of investor activity within.

In Toronto for example, Urbanation, a leading condo research firm, reports that many downtown condominium projects are selling over 70% of their units to investors.

Toronto has 148 high-rises and skyscrapers being built, compared with 59 tall buildings for No. 2-ranked New York City, and 22 in Chicago. (source)

Bloomberg reports that: “Developers sell most units of a project before building begins, and many investors buy the condos to either resell or rent out when the construction is finished. Rental units accounted for 24 percent of all condos in Toronto last year, up from 21 percent in 2010, according to CMHC.”

CAAMP estimates in their report that at the peak of the US housing boom in 2006 about 20-25% of US home sales were attributable to the “investment motive”.

While this degree of investmentmania might be limited to certain Canadian cities, it has been stated that “while the risks of sharp corrections primarily affect Toronto and Vancouver, these two markets could potentially generate a negative spillover effect that could impact the entire Canadian real estate market.” (Source)

CAAMP also asserts that “borrowers and lenders have exercised foresight and there is considerable room to tolerate higher interest rates.”

Yet in their own survey last year they stated that “there is a sizable minority of about 650,000 [people] who would be challenged by rate rises of less than 1 per cent.”

Yes, a rate increase of less than one percent.

CAAMP tweeted a link to a report that began with:


I tweeted back, “Just curious, did CAAMP warn against 0%/40 year mortgages when introduced?”

No response.

Related article:  The Catalyst & Noose (January 2011)

3 responses to “Is CAAMP’s Analysis Correct?

  1. Condo Investors Beware
    BNN, February 21, 2012

    Economists are increasingly sounding the alarm bells for condo investors in Toronto and Vancouver, saying a tsunami of new units in the coming years will weigh on prices… Read article, watch video

  2. Pingback: TD Warns Of Overvalued Canadian Housing | Calgary Real Estate Review

  3. Pingback: Canada’s Housing Market Is Correcting – Who Do You Believe? | Calgary Real Estate Review

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