I wasn’t surprised that affordable housing was a major issue in the federal election. Now that it’s all over, you might be wondering where that leaves us when it comes to tackling this issue. Here I take a non-partisan look at what we lost and gained from the Liberals remaining in power.
Housing Availability
The Liberals promised to build, preserve, or repair 1.4 million homes in the next four years. Their goal is to increase supply to help lower prices. This is more homes in a shorter period than what the other parties promised.
Foreign Sales
Foreign sales have continued to force housing prices upwards for years. The NDP promised to impose a 20% tax on foreign homebuyers while the Liberals and Conservatives both planned to ban foreign purchases outright for two years. Because foreign buyers are rolling in dough, the tax might not prove enough to fend them off. However, an outright ban for two years would keep foreign buyers out of the market altogether. This could help keep prices from rising at such a rapid pace. As a bonus, it will also reduce the number of investor-owned homes sitting empty in cities with housing shortages.
Mortgages
The Liberals did not have anything directly related to mortgages to add to their already challenging stress test. You might feel we lost out on the Conservatives’ idea to reduce the need for mortgage stress tests. However, we have to keep in mind that while this sounds good in theory, it adds to current inventory challenges. So the end result would have been continuous upward pressure on prices. The Conservatives also proposed introducing seven-to-ten-year mortgages, another idea that would bring more buyers onto the market, having the same upward effect on pricing. The NDP on the other hand, wanted to re-introduce a 30-year term on CMHC-insured mortgages, providing just enough wiggle room to make mortgages more affordable. The bottom line is that until housing inventories begin to rise again, any plans to make it easier to get a mortgage will sadly, likely push prices up.
Incentives
The Liberals promised to double the first-time home buyers tax credit to $10,000, but also invest $1 billion towards loans and grants to create rent-to-own projects. Tax credits are always nice, but the latter creates a new vein of inventory, so it doesn’t affect competition among buyers. This is a good thing. They are also promising to create a tax-free ‘First Home Savings Account’ for people under 40 to build down payments up to $40,000. This would make it easier for home buyers to afford a home, but in the future. This reduces pressure on competition while still helping people achieve their home ownership dreams. The NDP wanted to increase the Home Buyer’s Tax Credit while also getting rid of the GST on newly built homes. Waiving the GST could incentivize more people to buy new, which could help with inventory challenges. As a result, you could say that we lost out on this opportunity with the Liberal’s reelection. The Conservatives didn’t touch on home buyer incentives.
Wrapping It Up
So there you have it. We really didn’t lose much when it comes right down to it. If Trudeau does follow through on his promises, it can help increase supply, maintain control of buyer competition, and, in turn, help stabilize prices.
If you were waiting to learn more about post-election opportunities before deciding to buy or sell a home, I’m here to help. Reach out to me today. For more on what you should know about the real estate market check out this blog.
Photo by Breno Assis on Unsplash
