On October 22, Canada woke up to a new federal government that evoked a multitude of polarizing responses that differed significantly from east to west. Regardless of where you stand on the federal election’s results, there are some notable changes that homeowners and future homeowners should take note of.
First Time Home Buyer Program:
The first time home buyers’ incentive program, as introduced by the Liberal government this year, will remain in place. Trudeau has even suggested that he would like to expand the program, although those details have not yet been released. There is still speculation around the actual effectiveness of the program in providing tangible financial support to first time buyers. There has been push from industry professionals to instead, increase the amortization periods to 30 years as a more effective way to make first-home purchases more affordable. This was a campaign promise put forward by the NDP and even though they will likely try and advocate for that change in the place of the FTHB incentive program, the Liberals will likely remain resistant.
The stress test, which was introduced in late 2017, is also likely to remain in place, although this continues to be a strong point of contention between the federal government and Premiere Kenney after he outlined the need for its removal in AB in his recent letter to the PM following his election. See the letter here.
After the recent federal election, the focus of many quickly shifted to the reaction of the market and the Bank of Canada (BoC). With no major reactionary declines to the market, interest rates will likely not decrease in the remaining months of 2019 as previously hoped. The BoC typically responds with rate decreases to simulate spending in the economy but without a drop in the markets, the BoC will likely not see a need to react. Even with the multiple interest rate reductions south of the boarder, the BoC has shown resistance to following suit, even though historically, these changes are often mirrored here in Canada. Want more information on how BoC interest rate changes impact you? Click here.
Only one BoC announcement date remains, on December 4th. Without a substantial change to markets, employment or policy, expect rates to remain the same until at least early 2020.
New Taxes on Foreign Property Owners:
For those who own property in Canada but are non-residents and non-Canadians, watch out for a national tax that is expected to be imposed by the Liberals in the not-so-distant future. The tax is a response to concerns over the rising prices of homes in many of Canada’s urban areas. The increasing cost of homeownership is blamed, in part, to vacant and semi-occupied properties that are owned by foreign investors that limit the number of homes available to Canadians.
The tax will be similar to policies already in place in British Colombia, where there is already a 2% tax in place. So far, it is unknown what impact this tax will have on the broader housing market. Some believe that the tax will serve as nothing more than a nuisance to foreign property owners and therefore have little to no impact on the affordability of the housing market. Others believe the negative impact will come from a decrease in foreign investment.
More details on the implementation of the tax are expected to be announced in November.
Continue to keep an eye out for more blogs from Tim Lacroix for updates on future changes like this one.
Buying Your First Home?
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