Millennials face an inordinate amount of obstacles when it buying a home. In part, this is due to the huge student loan balance so many are currently carrying. In fact, over half of the millennials who attend college or university exit the experience saying that college it wasn’t worth the supposed pay-off. Now, Liberal leader and Prime Minister Justin Trudeau, with a federal election on the horizon, is sympathizing with the millennial cohort, who still want to somehow achieve the dream of home ownership.
For the millennial voters Justin Trudeau is targeting with this announcement, help may actually be on the way in high-priced housing markets, such as Toronto and Vancouver. Liberals plan to expand the First Time Home Buyer Incentive Program (FTHBI) in which the Canada Mortgage and Housing Corporation (CMHC) kick in up to 10 per cent of the purchase price of the home. But this is only if the borrower is able to come up with the minimum amount needed for an insured mortgage. That amount is currently set at 5 per cent.
FTHBI was brought in with this year’s budget, aiming to help first-time homebuyers who earn less than $120,000 per year buy a home. However, for a buyer to qualify, the total value of the mortgage plus the CMHC’s portion cannot exceed $480,000. How many Toronto properties can you think of with that price tag? Virtually none.
That’s why Trudeau is increasing the cap to $789,000 for urban centres such as Victoria, Vancouver and the GTA. While BlogTO reported that the price of an average home has now reached $830,000, you might be able to get a “fixer upper” with Trudeau’s new program.
Trudeau finally stated the obvious at his Victoria press conference, saying, “Young people hoping to buy a first home, as their parents did a generation ago, are facing a tough housing market”.
With Toronto area housing sales up 24.3 per cent this past July, the new figure promises to, as Trudeau says, “provide extra help” to the young people who wish to purchase property in these increasingly populated urban centres. He also hinted to a “vacancy tax” to be levied against the, in his words, “modest” 1 per cent of foreign buyers who own, but do not live in their Canadian residences. He noted that this would happen only if the Liberals were re-elected for a second term.
Inspired by B.C.’s provincial tax that helped to push foreign capital out of the housing market, Trudeau’s proposed national tax would help prevent housing costs from rising even further.
“That is why it’s important to create a national measure right across the country, based on B.C.’s success with it, to ensure that foreign speculation doesn’t make housing less affordable for Canadians,” he said.
Jason Stephen, president of the Canadian Real Estate Association said this came as a welcome announcement, especially for young people who feel it is impossible to purchase a home in one of Canada’s big cities. “The extension of eligibility requirements is great news that will allow Canadians in Canada’s highest priced markets (to) take advantage of the program and start building their lives in a home of their own,” said Stephen.
This is some good news for first-time buyers that is long overdue.