A pair of Liberal proposals to make home ownership more attainable would have a negligible impact, particularly in markets like Vancouver, Victoria and the Greater Toronto Area where home prices continue to soar beyond the reach of many, experts say.
The Liberals rolled out proposals Thursday for a nationwide foreign buyers tax and an expanded assistance program for first-time homebuyers in those three cities as part of their election campaign.
The one per cent tax on buyers abroad would deter speculation, but smaller communities that rely on U.S. tourists — like Mont Tremblant, Que., and Whistler, B.C. — could wind up hurting from fewer consumers and sagging real estate prices, said Tsur Somerville, a professor at the University of British Columbia’s Sauder School of Business.
“The problem with foreign buyers is not foreigners owning real estate — it’s not like they can take it home with them — but the extent to which it causes problems for local people who want to own homes or rent homes. And that’s not a problem everywhere in the country — Calgary or Edmonton or much of Quebec,” he said.
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Property tax should remain the purview of local or provincial governments, he said. “I don’t think there’s a space there for a national policy, particularly if you’re not doing the carve-outs for the places that actually want foreign buyers.”
The Liberal proposal to raise the value of homes that qualify for the First-Time Home Buyer Incentive to $789,000 from $505,000 may nudge up demand, but houses in Toronto, Vancouver and Victoria are too expensive for most families to take advantage, said Sal Gualtieri, a senior economist at BMO Capital Markets.
“The program itself would have a very modest impact on the housing market across the country, and a pretty minimal impact on Toronto, Vancouver and Victoria,” Gualtieri said.
“It’s just not big enough to really move the needle on housing demand. It’s helpful, but it’s not a game-changer,” he said.
First-time buyers on the hunt for condominiums or townhouses may find the program more useful, he added.
The original mortgage program, which took effect on Sept. 1 after the March budget earmarked $1.25 billion over three years, mandates Canada’s housing agency to contribute up to 10 per cent of the price of a buyer’s first home if certain conditions are met. A key criticism was that the half-million-dollar cap fell too low to help would-be homebuyers in hot real estate markets.
In addition to a higher home-value ceiling, the revamped Liberal proposal raises the household income cap for those looking to qualify to $150,000 a year, up from $120,000.
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Residents would benefit more from Ottawa incentivizing purpose-built rental apartments and loosening the rules around mortgage stress tests, said Ashley Smith, president of the Real Estate Board of Greater Vancouver.
Any adjustment that could allow more prospective purchasers to crack the local housing market is “welcome,” she said, “but until now the program wasn’t really relevant in our market because of the price point.”
Earlier this year British Columbia introduced a speculation and vacancy tax to improve housing affordability and increase the availability of rental properties. The measure came after the government hiked the foreign buyers tax on property sales to 20 per cent and expanded it to several regions beyond Metro Vancouver.
“In British Columbia, especially in the Lower Mainland, we’ve already seen the introduction of a variety of new taxes. Adding additional layers is not going to be a benefit,” Smith said.
On Thursday, real estate associations representing nearly three-quarters of the realtors in Canada called on all federal parties to commit to easing mortgage rules.
They say too much regulation plays a big role in making home ownership unaffordable across the country, while the CEO of the Canada Mortgage and Housing Corp. has urged the federal government to keep the rules in place to protect the economy from tragic consequences as debt levels soar.