As discussed in our annual report (download your copy here), public policy has a large part to play in determining price movements for real estate. And with both BC provincial and federal politicians seemingly in election mode, policy is an area that we have to direct more attention (probably the case for the next 8-12 months).
Today, the federal government capitulated somewhat to their demand reduction campaign that was aimed at improving affordability by reducing speculator and investor participation in the real estate market. While it wasn’t the “stress test” being eliminated (as has been widely speculated as possible), the property value cap for CMHC insurance was increased from 1 Million to 1.5 Million. This means that buyers of properties in this price category no longer need a minimum of a 20% down payment. So if coming up with the down payment was the big problem (and not income), this changes the calculus for that buyer substantially.
Additionally, 30 year amortizations were opened up to be used for new builds and for all first time buyers. This is aimed directly at reducing what has started to become an oversupply of pre-construction units and downward price movement in resale condos in Vancouver and Toronto specifically.
This will absolutely move the needle on local markets in a number of ways. 1) with interest rates now on the decline, the math becomes far more attractive than it was just 3 months ago for buyers of condo properties. 2), move up buyers that haven’t been able to sell their existing properties should notice an uptick in buyer interest, possibly allowing them to 3) purchase an entry-level single family home.
So even though these changes don’t directly affect the North Shore single family market where prices are above the $1.5 Million figure, it can be reasonably expected that any loosening of tight market conditions down-market will “trickle up” to properties in other categories.
How this policy change dovetails with “making homeownership more affordable” isn’t exactly clear, as it unambiguously stimulates demand and price increases. But if developers can clear out existing inventory, they’re more likely to green-light their shovel-ready projects currently shelved. Ultimately, this is about politics. Federal Liberals are at serious risk of being wiped out in a snap election, and they’re logically looking for whatever goodwill they can build.
We shouldn’t expect these to be the last of the policy changes incoming. While these are not effective until December 15th, either provincial or federal governments are likely to make splashes before then as incumbent parties fear for their political lives.
Matthew Stiles
Did you enjoy the market update? Subscribe here to receive them direct to your inbox. Feel free to message me at matt@stilesre.ca or call 778-227-3507 to discuss how the above may affect your largest asset and how to keep me in your corner when it comes to making real estate decisions.
Disclaimer: The information provided in this column is for general informational purposes only and does not constitute financial, investment, or other professional advice. While I strive to provide accurate and up-to-date information, I make no warranties or representations as to its accuracy, completeness, or reliability. Any actions taken based on this information are at your own risk. Always consult with a qualified financial advisor before making any investment decisions.