Canada seeing rise in foreclosures
|Friday, 17 April 2009|
Foreclosures are rising in Canada despite property analysts predicting several months ago that the country would not suffer too much from the global real estate crisis.
A ballooning pool of sub-prime mortgage foreclosures are being reported nationwide by companies that track foreclosure proceedings.
But some are pointing out that there is an upside to the trend as they represent new bargains for property investors and speculators.
According to Kap Hiroti of Foreclosurelist.ca, a company that tracks proceedings and links sellers with buyers, there has been a boom in the foreclosure business. 'A lot more properties will be sitting for longer and some of the properties are going to be vacant,' he said.
Foreclosure rates are soaring in Alberta and British Columbia. About half of those affected received mortgages they couldn't really afford from lenders who were willing to finance borrowers who would be considered too risky by mainstream lenders.
The rate of foreclosure proceedings has doubled in Alberta in the past two years and subprime lenders made up 56% of foreclosures last year. In British Columbia subprime lenders were responsible for 42% of foreclosures last year.
Officials in Canada claimed that as the country has more stringent financial and lending rules than in the US it would not suffer a sub-prime crisis but the reality seems different and now they are taking moves to clamp down.
The government is taking steps to tighten regulations around lending, such as limiting mortgages to 35 years and requiring a 5% down payment. Federal Finance Minister Jim Flaherty said the latest subprime data is no cause for concern.
'We knew we had some of these mortgages. They are mortgages that were made to people generally who were not credit-worthy. But we did not have in Canada the kind of exotic subprime mortgages - bubble payments, low payments for 12 months and then your payments tripled - those kinds of mortgages that caused a great deal of trouble in the United States. That's not the situation in Canada,' he claimed.
However one economist has estimated that 85,000 Canadians in 2006 had subprime loans and added that subprime was becoming the fastest growing segment of the mortgage market.
Foreclosure bargains will increase as owners become desperate to sell according to one property investor. Glen Mabbott, who has already bought foreclosed property in the US, said owners are not desperate enough yet. He sent letters to 100 owners in the early stage of foreclosure but found they still wanted a market price.
But Hiroti believes that the attitude of sellers will change with real estate prices sliding amid a recession. 'It will get to the point where people will be walking away from their properties,' he predicted.
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