BC home loan program bumps prices up by 0.5%
Economist says the impact could be bigger
A program introduced under the BC Liberals that gives first-time homebuyers an interest-free loan to help on a down payment has increased housing prices by half a per cent, a new report shows.
But at least one economist says the impact may be higher.
In the BC Home Partnership program, people are eligible to receive up to $37,500, interestfree for five years, if they are approved for an insured highratio mortgage where the down payment is less than 20 per cent of the home’s purchase price.
Nearly 1,400 households took advantage of this deal in the program’s first nine-months, according to a report by the BC Real Estate Association. One-third of those transactions took place in Metro Vancouver and was responsible for boosting apartment prices in that region by 0.55 per cent and townhome prices by 0.57, according to the reports’ authors.
“We found the impact was quite negligible…there were relatively few sales (in the program) compared to total market transactions,” said Cameron Muir, chief economist at the BC Real Estate Association.
Condo values increased by as much as 40 per cent in some parts of Metro Vancouver in 2017, according to BC Assessment.
Muir’s team looked at the relationship between home prices and home sales, and modelled what prices would have looked like if the sales made possible by the program did not happen.
But Tom Davidoff, a professor at UBC’S Sauder School of Business, says that analysis does not take into account the possibility that people who received an interest-free loan would be willing to pay a higher price than usual.
“Imagine if you have five firsttime buyers competing for an apartment and now three of them can afford to pay more. I don’t see where (the report) has handled that,” he said. “This methodology doesn’t rule out something closer to three or four per cent (price) increase.”
About 30 per cent of people in the BC Home Partnership program had less than five per cent down payment prior to receiving the government loan, according to the BC Real Estate Association.
If interest rates go up significantly, “these (mortgages) are primed to default — it’s quite likely,” said Davidoff.
Almost all of the home sales bought in the BC Home Partnership Program were for apartment or townhouses, according to the BC Real Estate Association.