British Columbia’s new assistance program for first-time home buyers has the potential to bolster a segment of the property market that has stayed strong in the midst of sliding sales, according to one market observer.
“The net impact (of the program), it does draw more people into the market, into the condo and town home market,” said Bryan Yu, senior economist with Central 1 Credit Union.
However, while sales have dropped off in the market for pricier single-family homes, Yu said the more affordable condominium and town home segments of the market have remained more active.
And that additional demand could push “upside pressure on pricing,” Yu said, because the multi-family housing sector is still struggling with a lack of supply to meet demand.
Premier Christy Clark on Thursday unveiled what government is calling the B.C. Home Partnership Program; low-cost loans to first-time buyers of up to $37,500 to help fund minimum down payment requirements.
Applicants can only buy properties valued to a maximum of $750,000, however the province’s expectation is that most users will be looking for entry-level homes in the $300,000 to $400,000 range.
Yu released Central 1’s economic forecast for B.C. on the same day as the provincial announcement in which he estimated that housing sales would continue to slow in 2017 particularly on the multi-family side as recent changes to mortgage-qualification rules were expected to squeeze more first-time buyers out of the market.
“This is going to be offsetting some of the weakness that would have come from the mortgage insurance rules,” Yu said.
While the province is billing the program as help to get first-time buyers into an overheated market, NDP housing critic David Eby argued that the boost will simply give buyers on the cusp of qualifying for mortgages more ammunition to bid up property prices and put them deeper in debt, which is one concern that the mortgage changes were designed to address.
Yu added that any help with their down payments that loan applicants get will be offset a little bit by added costs. Because they are borrowing part of their down payments, they will have to pay higher premiums for mortgage insurance, and the loans will count against a buyer’s total debt-to-income ratio that a bank will use in evaluating their mortgage application.
Canada Mortgage and Housing Corp. spokeswoman Jeanette Wilkinson, in a statement, said CMHC “will be applying our usual standards” in evaluating applications for mortgage insurance under the program, which means gauging a buyer’s ability to repay all their debts, including the down-payment assistance loans.
However, Yu said forecasters won’t be able to estimate how big an impact the loan program will have on market demand until they start to see how many buyers make applications.