TORONTO — Potential homebuyers are frustrated. Among their complaints: Too few homes, prices too high, too much demand and not enough supply.
Many first-time buyers have struggled with securing a down payment, obtaining sustainable income to support the ongoing payments, and ultimately qualifying for a home that not only meets their needs but also their desires.
This is clearly a pocketbook issue that has garnered a lot of attention, with politicians zeroing in on ways that just might make the dream of owning a home that much easier.
Here are a few of the platform issues that could sway your vote, depending on your personal financial situation.
The Liberals continue to promote their incentive program for first-time homebuyers. There are not a lot of changes here, as participants still have to come up with a minimum down payment.
While the program offers some benefit for those looking to enter the market — you have a shared equity position with the government that is presented as interest-free — there is still a cost based on the appreciation of the home, which could in fact be higher than the borrowing rate.
As James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage, told me in an email: “First-time home buyers struggle with two things: saving the down payment and qualifying for a big enough mortgage to purchase the home that they want. The First-Time Home Buyer Incentive program still requires the borrower to come up with the minimum down payment, and actually reduces the purchase price someone can qualify for by about 6 per cent.”
Helping with the lack of supply issue, the Liberals have proposed a national tax on vacant residential properties owned by non-Canadians who don’t live in Canada. The policy would also ensure foreign-owned properties are available for rent.
Meanwhile, the Conservative Party is targeting those who have a good credit rating and good income, yet continue to struggle to cobble together a 20% down payment on homes in excess of $1 million. The goal here is to increase mortgage insurance eligibility and then index it to home price inflation.
They are also looking to remove the stress test from mortgage renewals, allowing homeowners to shop around for better rates without having to re-qualify for a mortgage. Also, if elected, they will allow the offering of longer-term mortgages of seven to 10 years, resulting in a little more stability for homeowners and the sector. as a whole.
The Conservatives are also zeroing in on foreign investors, saying they will ban home purchases from those not living in or planning on moving to Canada, for a two-year period. Also, addressing the supply side of the equation, they have made a promise to build one million homes in the next three years.
Once very popular, the 30-year amortization for insured mortgages is back on the table with the New Democratic Party.
Canadians who put down less than 20% will have the option of increasing the amortization from 25% to 30%. This would allow first-time homebuyers to qualify for approximately a 10% higher purchase price without their monthly mortgage payments going higher.
The benefit of a 30-year amortization is that it helps to keep payments more manageable, while offering a little more time to pay it off.
The NDP also have a focus on more supply, saying they would create 500,000 affordable housing units within the next 10 years. They’re also targeting foreign buyers, with a 20% foreign-buyers’ tax aimed at slowing demand and ultimately reducing prices..
There is a lot to unpack here. When it comes right down to it, which policy issues will really move the dial when it comes to affordability?
Here is what Laird had to say: “There are two policies that would really move the needle for first-time home buyers in the next election, which are allowing a 30-year amortization period when people are putting less than 20 per cent down (proposed by the NDP) and increasing the home value that is eligible for mortgage insurance, which therefore allows the home buyer to put less than 20 per cent down (proposed by the Conservatives). These two policies are material and would help more young Canadians purchase their first home. The enhancement to the First-Time Home Buyer Incentive (proposed by the Liberals) is flawed policy, and therefore unhelpful.”
On Sept. 20, you have the chance to decide which policies speak to you and your family’s financial needs.