Trudeau’s homebuyer plan sparks skepticism
Experts fear people in the priciest cities won’t get much help
Prime Minister Justin Trudeau wants to make housing more affordable for firsttime buyers. But that may be of little help to people in the country’s priciest cities.
The national housing agency aims to spend up to $1.25 billion over three years subsidizing down payments for new lower- to middle-income buyers.
Under the just-launched program, the government will pay up to 10 per cent of the purchase price in exchange for a stake in the home that would be paid back once it’s sold.
The plan targets millennials, a growing cohort that’s getting squeezed out of Canada’s housing market. Home prices across the country jumped almost 40 per cent in the five years through July, largely driven by gains in cities such as Toronto and Vancouver.
Trudeau’s government expects the program will be used by 100,000 buyers, but brokers and analysts are skeptical.
“It’s a very narrowly focused program,” Royal LePage president Phil Soper said. “It’s just not a big enough slot of the market to move it.”
While there are people who will benefit, the initiative is unlikely to help those looking in Toronto or Vancouver, where the average price of a home in July was $826,165 and $982,427 respectively. The program is available to buyers with annual household earnings of $120,000 or less.
Under those conditions, the maximum purchase price allowed is about $565,000.
That puts markets such as Toronto,
Kitchener-Waterloo, Greater Vancouver and Victoria out of reach of the average buyer, according to real estate website Zoocasa.
Cities where home-shoppers would have more luck include Montreal, Ottawa, Calgary and Edmonton, Zoocasa said.
The program, called the FirstTime Home Buyer Incentive, will also encourage construction to help ease the country’s housing-supply shortage, according to the Canada Mortgage and Housing Corp.
“Despite the income and borrowing limits, we are confident this program can work in all markets, including Vancouver and Toronto,” Audrey-Anne Coulombe, a spokesperson for CMHC, said in an email.
The average prices in those cities “are not the same as starter-home prices. In the first quarter, 32 per cent of units sold in Toronto and 20 per cent in Vancouver were under $499,000.”
Still, the effort may result in fewer than 5,000 purchases a year, according to a report by Mortgage Professionals Canada.
Buyers’ resistance to give up equity in their homes and the requirement for mortgage insurance will be a substantial impediment, said Will Dunning, chief economist for the group. “The government says it wants to make homeownership more affordable and accessible, but its actions say otherwise,” he said.
The proposals “to improve access are likely to have only small positive effects.”