A B.C. government program aimed at helping first-time homebuyers with their down payment has loaned out more than $13 million in its first six months.
But one economist says the big payout by the BC Home Owner Mortgage and Equity Partnership program appears to be one of the factors fueling the region’s newly soaring condo market.
More than 1,100 people have now taken advantage of the provincial program which will loan buyers up to five per cent of the price of a home, to a maximum of $37,000 – with a five-year grace period on interest payments.
UBC economist Tom Davidoff said adding that many new buyers into a market with already tight supply is driving up condo costs.
“It’s not the dominant driver of the market, but had you never had this program, prices would be lower than they are today,” he said.
“If you took this program away, you’re looking at 10 per cent lower prices than without it.”
WATCH: Applications open for a new program aimed at helping people break into BC’s red-hot housing market.
The BC Liberals announced the program back in December, arguing it would help young families crack into the red-hot housing market.
But critics warned that financially stretched buyers would take on risk by essentially starting a second mortgage and that the infusion of cash could drive prices up.
Davidoff said that second case appears to be playing out, with people using the program now accounting for about five to 10 per cent of condo purchases.
“When there’s too many people chasing too few houses, pushing more people to get in on the action just seems like a really dumb idea.”
Condo sales have been driving the Metro Vancouver real estate market in recent months, and the average unit price now sits at about $655,000.
For the month of May, the Real Estate Board of Greater Vancouver found 95 per cent of all condos listed had sold, with prices up more than 17 per cent year over year.
Over the weekend, Vancouver realtor Steve Saretsky warned the brisk trade, with unit values appreciating as much as two per cent per month, were now driving an increase in condo flipping.