Banks tightening financing rules for condo builders

March 23, 2012

Some Canadian banks are now requiring condo builders put more equity into new projects, raising the percentage of condo units that must be pre-sold and are also demanding higher deposits as conditions for financing.
These tightening lending standards for condominium builders are being introduced as concerns that the Toronto and Vancouver markets are overheating.
Last week the Office of the Superintendent of Financial released new draft guidelines for mortgage underwriting by Canadian financial institutions. Banks should take “reasonable steps” to verify a borrower’s income before granting mortgages, the agency said. Financial institutions should also establish internal standards on the ability of borrowers to service their debt.
The condo building surge is being led by developers ranging from Toronto-based Tridel Group and Vancouver-based Concord Pacific to El-Ad Canada Inc. Toronto has more skyscrapers and high-rises under construction than any North American city — almost three times as many as New York.

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