As part of this week’s federal government economic fiscal update, a couple key means are being introduced to help control housing access and prices.
First, Ottawa is bolstering its First-Time Home Buyer Incentive (FTHBI), a program designed to help ease mortgage costs for first-time homebuyers by decreasing monthly payments through shared-equity loans of up to 5% toward the down payment of a resale home and as much as 10% for newly-built homes. The idea is that, by boosting the size of your down payment, the FTHBI decreases monthly mortgage costs, making homeownership more affordable.
When the FTHBI was first introduced in 2019, the maximum home price to be eligible was four times household income, but it’s going up to 4.5 times household income in spring 2021 for three high-priced markets: Toronto; Vancouver; and Victoria. The buyer’s income threshold is being raised from $120,000 to $150,000. The changes mean the maximum home price for eligible first-time buyers in the three markets rises from $505,000 to about $722,000.
This action is in response to a relatively low uptake on the program and concerns from critics that $505,000 was too low considering the high prices in these three markets.
There is early speculation that this expansion could lead to higher prices in the target markets, which are already setting volume and pricing records.
Second, the feds will take steps over the next year to tax foreign homeowners who live outside of Canada as part of a plan to lower housing prices. It’s an idea that has been growing in popularity over the last few years in provinces such as Ontario, British Columbia and Prince Edward Island, but some experts question how effective such a plan would be.
The government says the move will benefit first-time homebuyers and put more homes on the market by taxing homeowners who use Canada to passively store wealth in housing, although full details of the plan were not unveiled.
Only time will tell if these programs will help get more first-time homebuyers into the market, but it’s a positive move when the government acknowledges that steps must be taken to curb affordability, particularly in more expensive, high-demands markets.
Have questions about buying your first home or concerning measures available to help you get involved in the property ladder sooner? Answers are a call or email away.