The liberal budget & your new home.
So you want to buy a new home but it feels like the mountain ahead of you is too steep. House prices keep rising. Interest rates and inflation mean your mortgage now costs more and so does your cost of living. If you’re looking at a new build, add to that lumber prices, aluminum prices and supply chain delays. Enter the Liberal budget with it’s focus on housing. Is relief finally in sight?
Doubling the number of new homes
We constantly hear it’s a sellers market. That’s because there’s a lack of available homes for sale across the country. Basically to catch up with demand the government aims to double the number of new homes being built in the next ten years. The budget put forward a host of new measures. Top of the building list is the accelerator fund. $4 billion over the next five years is to be given to municipalities to build 100,000 new homes.
Addressing the lack of supply in the housing market has been broadly welcomed by economists. The warning is, there is NO immediate relief for home buyers. The measures will take years to enter the marketplace. The accelerator fund will start to be rolled out this year or the next and building homes takes time. Experts also warn the scale of the problem shouldn’t be underestimated. The construction industry is already working under pressure with labour shortages and supply chain issues.
Tax breaks for first time buyers
Demand for more homes is constantly growing. A Royal Le Page survey found nearly 70% of 25-35 year olds who don’t already own a home want to buy one in the next five years. A new tax free savings account will allow first time buyers to save up to $40,000 to buy a new home. That’s a tax saving of around $1,500. It aims to start next year. The Liberals also aim to double the first time home buyer tax credit amount to $10,000.
That would apply to home sales from January this year. That’s another $1,500 tax saving. These moves are again being welcomed but experts warn that measures which encourage demand for new homes can also just push up prices.
Ban on foreign investment buyers
This announcement grabbed headlines around the world when it was announced. The budget aims to ban foreign buyers from Canadian housing for two years. There are many exceptions like permanent residents, international students and foreigners on work visas. The level of impact the ban will have on the market is being questioned for two reasons. The first is that it doesn’t ban foreign buyers from purchasing recreational homes and that is considered to be the biggest foreign market. Secondly the influence of foreign investment on the market is being questioned. There’s no surprise that
Vancouver and Toronto have the highest numbers of foreign buyers but nationwide levels are low with estimates between 1-2 % of sales. Further surveys show foreigners buy newer and more expensive homes so their influence on the housing market as a whole is in doubt.
Ironically, one of the biggest problems, inflation, may be the salvation for new homebuyers. With interest rates rising to combat the problem, so too are mortgage rates. It’s these interest rate rises that many like senior economist Robert Hogue of RBC believe may finally dampen the housing market. So will the new budget help? Maybe but not immediately. However, some people are now talking about prices in real estate actually falling. That could be the biggest step up yet for first time homebuyers.
Posted by Kirby Cox on