First-time buy­ers de­lay­ing home own­er­ship on ac­count of new mort­gage rules, OREA re­search shows

The Hamilton Spectator - - REAL ESTATE -

Sev­enty-nine per cent of first­time home buy­ers in On­tario say that the fed­eral gov­ern­ment's new, more strin­gent mort­gage rules will throw a wrench into their home buy­ing plans, ac­cord­ing to the On­tario Home Own­er­ship In­dex – a semi-an­nual con­sumer study com­mis­sioned by the On­tario Real Es­tate As­so­ci­a­tion (OREA).

Mort­gage stress test­ing will de­lay home own­er­ship for nearly half of On­tario's first-time buy­ers, the sur­vey con­ducted by Ip­sos Reid shows.

"Our sur­vey in­di­cates that the new stress test will have a neg­a­tive im­pact on first-time buy­ers' abil­ity to buy a home," says OREA CEO Tim Hu­dak. "It's im­por­tant to re­mem­ber who's be­ing af­fected by mea­sures that curb hous­ing de­mand – a young fam­ily look­ing for more space, a twenty-some­thing try­ing to get out of his or her par­ent's base­ment. Just when they're about to make the leap into home own­er­ship, things get a lit­tle less af­ford­able."

The new rules in­tro­duced last Oc­to­ber re­quire buy­ers with less than a 20% down pay­ment to qual­ify for a mort­gage at a higher in­ter­est rate. Think­ing about how the new rules could im­pact them, 45% of first-time home buy­ers say they will need to keep sav­ing for a 20% down pay­ment be­fore buy­ing a home; 27% be­lieve they will need to find ad­di­tional money to in­crease their down pay­ment, and many say they will need to look for a less ex­pen­sive home ei­ther in the same city (34%) or a dif­fer­ent city (22%).

"Mort­gage stress test­ing, ris­ing house prices, lack of sup­ply – we're deal­ing with a real es­tate mar­ket that is get­ting tougher and tougher for the first-time buyer to break into, es­pe­cially in the GTA," says Hu­dak. "Rather than fo­cus­ing on poli­cies aimed at curb­ing de­mand, let's con­sider boost­ing the hous­ing sup­ply or en­forc­ing mea­sures that make home own­er­ship more af­ford­able like the pro­vin­cial gov­ern­ment did this month."

As of Jan­uary 1, On­tario's first-time home buy­ers are el­i­gi­ble to re­ceive a $4,000 land trans­fer tax re­bate, an in­crease of $2,000. Con­versely, in Toronto, the City is con­sid­er­ing an in­crease to the Toronto land trans­fer tax, a move that will fur­ther re­duce home af­ford­abil­ity for young fam­i­lies. If Toronto matched the re­lief of­fered by the province, Toronto home buy­ers would get back $12,000 in land trans­fer tax re­bate.

"More re­bate means more money in the pock­ets of first­time buy­ers which ben­e­fits both home own­ers and the province," says Hu­dak. "The money that home buy­ers get back ei­ther ends up go­ing to­wards their mort­gage or more of­ten they spend it on fur­ni­ture, ap­pli­ances, ren­o­va­tions. The eco­nomic spin-off that comes with ev­ery home sale is im­mense. In this re­gard, the City of Toronto stands more to gain from giv­ing its home buy­ers more re­bate, rather than a tax in­crease."

The On­tario Home Own­er­ship In­dex is de­signed to re­flect On­tar­i­ans' over­all views of the res­i­den­tial real es­tate mar­ket in On­tario, and in­cor­po­rates mea­sures such as On­tar­i­ans' per­cep­tions of whether the mar­ket in their neigh­bour­hood, city, and On­tario, re­spec­tively, have im­proved or wors­ened in the last year and look­ing ahead into the fu­ture, whether home own­er­ship is im­por­tant to them and whether it is a good in­vest­ment in the long-term.

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