The share of home purchases by first-time homebuyers has declined since 2015. (Source: Bank of Canada)
The federal government plans to stop speculators and investors from driving up property values and hoarding properties which has led to a shortage of resale homes and overbidding across Canada, according to Prime Minister Justin Trudeau.
In a December 16, 2021 mandate letter to Ahmed Hussen, minister of housing and diversity and inclusion, the prime minister directed the minister to work with provinces, municipalities, the deputy prime minister, and minister of finance to develop a Fairness in Real Estate Action Plan.
The plan includes:
developing policies to curb excessive profits in investment properties while protecting small independent landlords; and
reviewing the down payment requirements for investment properties that are not owner-occupied.
The government is expected to:
increase the down payment required for a non-principal residence, currently at 20 per cent; and
exclude home equity lines of credit as the source of the down payment.
Why these measures?
The Bank of Canada has consistently highlighted supply and demand imbalances and household debt.
UBC professor and Bank of Canada deputy governor Paul Beaudry, told the Ontario Securities Commission, “a sudden influx of investors in the housing market likely contributed to the rapid price increases we saw earlier this year.”
The Bank of Canada’s research report, Housing demand in Canada: A novel approach to classifying mortgaged homebuyers (January 2022) found that the share of first-time buyers significantly declined, while the share of homes bought by investors climbed above 20 per cent.
More than 25 per cent of homes were bought by buyers who already own a home according to Teranet’s Q4 2021 Market Insights.
Details of the government’s measures to cool speculation are expected sometime this spring.
Post Your Comment: