There seems to be tremendous confusion between asset price inflation and consumer inflation. “Printing Money” or expanding the Federal Reserve’s balance sheet, has caused asset price inflation. Specifically, the price of financial assets (stocks, bonds) and real assets (commodities, real estate, gold) have all risen as a result of the FED’s actions.
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Why houses/condos may fall in value but apartment buildings do not.
There is a common misperception that all real estate classes are created equal. House prices are falling in some cities in Canada, primarily because the rules to get mortgages have changed, such as increased debt-coverage ratios, higher down payments and shorter amortization. This allowed our Finance Minister Hon. Jim Flaherty to tighten consumer debt without raising interest rates! This leads some to believe that those (modestly) falling house prices will also affect other real estate classes, such as apartment buildings. Nothing could be further from the truth.
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