This year both the Liberal and Conservative parties will hold the most seats but no party has a majority. This means that coalitions will need to be formed to make any progress. Regardless of who forms a coalition with who, the parties already had a bit of overlap in their platform when it came to housing.
We believe that the most likely outcome will be that either the 30-year amortization or the extended First-time Home Buyer Incentive (FTHBI), but not both, will be put forward. The proposed extension to the FTHBI and a 30-year amortization both increase buyer’s purchasing power by around 8%. The difference is that the 30-year amortization would apply to all Canadians, whereas the extended FTHBI would only benefit anyone living in the greater Victoria, Vancouver or Toronto areas.
Almost all parties are on board with increasing the supply of new housing units, so it’s not a matter of if they will go forward but how many will be built. We believe the final figure will lie somewhere between the Green Party’s proposed 25,000 units per year and the NDP’s 50,000 units per year.
In the short-term, expect a minor increase in your purchasing power as a result of the 30-year amortization or the expanded FTHBI (if you live in the Greater Toronto, Victoria or Vancouver areas). If all else remains constant, you would get roughly an 8% increase in your purchasing power under either party but it’s very likely some of that benefit will be lost by way of property prices increasing.If a significant amount of people immediately can bid 8% more, then prices are likely to rise and erode some of your newly acquired benefit.
In the long-term, having an extra 25,000-50,000 newly built units hit the Canadian market will be a large increase over current figures (referring to CMHC’s new build data, around 128,000 newly built units are sold per year over the past 5 years). However, the impact to housing will depend on so many other variables (population growth, the economy, the location of the new homes, etc) that it’s impossible to say with certainty that this will result in lower home prices. We believe the government will want to moderate price growth, not bring down housing prices. So if homes are unaffordable for you now, they will likely still be unaffordable for first-time home buyers in 3-5 years.
We stand by what we said last week. A home buying plan is still the best way for you to get into your first home. Getting your first home is a lot more complicated today than it used to be.
The good news is we can help you set a realistic target and give you a free plan to achieve it. You can put a plan together with one of our mortgage experts or automatically through your Mortgauge profile by clicking the button below.