Andrew Willis: The Liberal party got another lease on life, and with one of the leading questions on the minds of Canadians is the health of the housing market, so we wanted to know where it’s headed.
It was a close race, with other parties playing a pivotal role in the outcome and steering policies that mean the most to Canadians.
In the end, it was Trudeau’s Liberals that took helm for another four years, winning by a small minority. And that means their new housing affordability policies come into play – and it will be worth watching how a federal initiative will be applied to trends that largely differ by municipality, notes Phil Soper, president and CEO of Royal LePage.
At odds with increasing debt levels, the Liberals committed to taking a 10% piece of the increasingly expensive equity for purchases by first-time homebuyers with their First-Time Home Buyer Incentive. One way the Liberals have addressed municipal trends is by expanding the incentive for the hot regional markets of Victoria, Vancouver and Toronto.
John Pasalis, President at Realosophy Realty and Soper both don’t see this incentive as making a major difference in terms of affordability. But both see the new Liberal minority as stuck with a housing supply crisis that isn’t going away.
A proposal for federal loans to increase energy efficiency and durability of homes may do little more than improve monthly cash flows. But there is some hope for the efficacy of a 1% tax on absentee foreign owners. Both Pasalis and Soper say this will mostly address property affordability at the higher end, but Pasalis notes that it will help curb the flow of money between provinces – another source of high demand – since it will reduce the incentive to shop around and drive up prices in regional centres.
Although there is a consensus that the risks from a frothy housing market has subsided, there is a deal-breaker that remains. With a slew of purpose-built rental properties coming online soon in markets like Toronto, this could see rents dip, weakening the business case for buying new condos, and potentially setting off a chain of events that could spell trouble for the market.
For Morningstar, I’m Andrew Willis.
