Nearly half of Ontario’s first-time buyers say they’ll delay their home purchase as a result of the federal government’s new mortgage rules introduced in October.
As part of the government’s new stress-testing measures, buyers with less than a 20% down payment must now prove they can afford a payment at the BoC benchmark rate (currently 4.64%).
That change alone will force approximately 45% of first-time homebuyers to postpone their purchase while they continue building up their down payment, according to a recent Ipsos poll conducted for the Ontario Real Estate Association (OREA).
“It’s important to remember who’s being affected by measures that curb housing demand–a young family looking for more space, [or] a 20-something trying to get out of his parents’ basement…,” said OREA CEO Tim Hudak. “Rather than focusing on policies aimed at curbing demand, let’s consider boosting the housing supply or enforcing measures that make home ownership more affordable…”
Overall, the more stringent rules are expected to impact the plans of 79% of all first-time homebuyers in Ontario. Those who won’t be delaying their purchase say they’ll have to find additional funds to cover the larger down payment (27% of respondents), look for a less expensive home (34%) or look for a home in a less desirable city (22%).
Story by Steve Huebl & Rob McLister
Tim Hudak is right- the government should do two things to boost housing supply:
1. At a federal level, the perverse tax incentives that artificially encourage home ownership should be unwound. The capital gains tax exemption on principal residences should be eliminated. Phase the elimination in over three years. Not only is this likely to provide a much needed boost to the supply of resale homes on the market, but it will also assist with inter-generational equity, and redistribute the tax burden in a way that on balance, is almost certainly more fair. Anyone with kids should be happy to take the tax hit. Those without kids- you’re net reliant on the tax burden on the next generation to fund your healthcare and OAS payments in retirement, so be grateful that those of us with kids were around to bear the cost of raising them.
2. At the municipal level, allow intensification without red tape. Steam roller NIMBYism. What a joke that scores of two story homes are within a 30 minute walk of Bay and King in Toronto. You don’t need to permit 50 story condos in the heart of the Annex to achieve more intensification, but allowing laneway homes and 4 story brownstones everywhere south of the 401 would do wonders.
But neither of these things will happen, because middle class entitlement will trump good public policy every time…
The collateral damage with the new mortgages rules is exactly what the poll shows – a number of first-time home-buyers have been displaced (and potentially right before they were anticipating their first home purchase) and may now need to change their plans, and I certainly don’t think that was the intended consequence – making it harder for a first time buyer to enter the market would, in my mind at least, be contrary to what the Liberal Gov’t wants to do.
……..maybe time to head back to the ol’ drawing board?