Over the last few weeks I have seen a huge increase in the Langley area of buyers trying to find condos or townhomes that allow rentals. Some complexes allow a percentage (usually 10 percent of the total unit) but those complexes are typically maxed out and have a long waiting list. I wanted to provide two links to make it much easier for the consumer:
First-time homebuyers can soon get a loan from the B.C. government to help with the down payment on a house, Premier Christy Clark announced Thursday.
But critics warn that the program will drive up prices and increase risk for young homeowners already carrying crippling debt.
The province will match the money saved by first-time buyers up to $37,500 or five per cent of purchase price.
No interest or principal payments are required in the first five years of the 25-year loans, as long as the home remains the buyer’s main residence. Purchase price must be $750,000 or less, excluding taxes and fees.
After five years, buyers will make monthly payments at prevailing interest rates. The loan will be registered as a second mortgage.
“What we know is for many first-time homebuyers, qualifying for a mortgage is hard, but getting past that down payment and scraping together the 25 grand or 50 grand that you might need to be able to get into your first home is just impossible,” Clark said.
“So we want to be there to help first-time homebuyers get over that hump. And we are going to be partners in their home.”
The province offered the example of a $475,000 home where the first-time buyer has saved $11,875 or 2.5 per cent of the selling price. In that case, the province will match the buyer’s saved amount, allowing them to make the required down payment of $23,750.
In the case of a $750,000 house where the buyer has saved seven per cent or $52,500, the province will match the buyer’s contribution up to five per cent of the price. The government’s maximum loan of $37,500 would allow the first-time buyer to put down $90,000 and reduce interest costs.
Tom Davidoff of University of B.C.’s Sauder School of Business panned the program for primarily benefiting sellers and developers. “I really don’t like it. I just think it’s lousy economics.”
He said that subsidizing buyers in markets with limited ability to increase housing supply will drive up prices. “So taking taxpayers’ money to give to people who own property — that’s a step in the wrong direction.”
B.C. NDP housing critic David Eby said the program will encourage young people to take on more debt. “This is a group that’s struggling with credit-card debt, student debt, record levels of debt that, according to the federal government, is so high it’s concerning for the federal economy.”
The province should use swaths of publicly owned land to develop co-ops and other affordable housing rather than selling the land for one-time gains, Eby said.
Bryan Yu, an economist with Central 1 Credit Union, struck a more positive note. He said helping first-time home buyers with their down payment is “critical” in higher-priced markets. “It does provide definitely a demand uplift on the townhome and condo side for areas like Victoria as well as Vancouver, and allows people who have been waiting to get into the market that ability.”
He doubted the program would increase prices significantly, because buyers still have to qualify under tighter federal rules that make it more difficult to get a mortgage. “A lot of these buyers who it’s targeted at are still constrained by other factors.”
Mike Nugent, president of the Victoria Real Estate Board, welcomed the program. “It’s certainly positive. A lot better than the federal government [saying]: ‘Let’s make borrowing and lending more restrictive.’ ”
The province is spending $703 million over three years for the B.C. Home Owner Mortgage and Equity Partnership program, and estimates it will help about 42,000 B.C. households get into the market. Clark said there is no cap. “It’s not as though once we get to 42,000, no one else will be eligible.”
The program will begin accepting applications on Jan 16.
To qualify, buyers must have:
• been pre-approved for a high-ratio insured mortgage for at least 80 per cent of the purchase price.
• been a Canadian citizen or permanent resident for at least five years.
• lived in B.C. for at least one year before applying.
• never owned interest in a residence anywhere in the world.
• combined, gross household income under $150,000.
– See more at: http://www.timescolonist.com/news/local/b-c-will-lend-first-time-home-buyers-up-to-37-500-1.4647435#sthash.dmfBGSzq.dpuf
Finance Minister Bill Morneau unveiled sweeping changes on Monday that will affect all pockets of the housing market, including rules aimed at slowing the flood of foreign money and strengthening a mortgage rate stress test.
The new measures come at a time of heightened anxiety about overheated housing markets in Vancouver and Toronto but also as prices soften in much of the rest of the country. As well, banks are already facing stricter regulatory requirements for their mortgage business.
“Overall, I believe the housing market is sound but as Minister of Finance I want to make sure we are proactive in assessing and addressing the factors that could lead to excess risk,” Mr. Morneau told reporters in Toronto.
The changes include:
closure of loopholes relating to the capital gains tax exemption on sales of principal residences.
standardized eligibility criteria for high- and low-ratio insured mortgages, including a “more robust” mortgage rate stress test.
a consultation aimed at better protecting taxpayers “by ensuring that the distribution of risk in the housing finance system is balanced.”
The government’s most anticipated measure involves cracking down on foreign buyers who used loopholes to avoid paying taxes on real estate speculation.
Under the new rules, taxpayers will be required to report on their income tax returns the sale of a property for which they claim the so-called principal residence exemption. Under Canadian tax rules, homeowners do not pay taxes on the increased value – or capital gains – of the sale of their principal residences. In order to make that designation, a homeowner, their current or former spouse or any of their children must have lived in the home at some time during the year for which the designation is claimed.
The federal government said the change will ensure that the principal residence exemption is used only by Canadian residents and that families designate just one property as their principal residence in a given year.
Previously, homeowners did not have to report the sale of properties they designated as their principal residences. There had been widespread abuse of the principal residence exemption by foreign buyers who claimed residency either for themselves or their spouses or children simply in order to avoid paying taxes on real estate sales.
In addition, Mr. Morneau announced a new round of sweeping changes to mortgage insurance.
Starting Oct. 17, borrowers who take out insured mortgages that are fixed-rate loans of five years or longer will be subjected to a more stringent “stress test,” ending the current two-tier system. Existing rules require home buyers who take out short-term or variable-rate mortgages with down payments of 20 per cent or less to prove they can afford payments at a much higher interest rate than they will actually pay. Borrowers who take out fixed-rate insured mortgages of five years or longer have their income tested against the interest rate that they will actually be paying. The end result is that borrowers can now typically qualify for much larger mortgages if they opt for a longer-term, fixed rate mortgage.
Under the new rules, all borrowers who have insured mortgages will have to qualify at the Bank of Canada posted rate, which is now significantly higher than the discounted mortgage rates offered by most lenders. The rules apply only to new mortgages, but they are significant given that a majority of homeowners are thought to take out the types of fixed-rate mortgages that will be affected by the stricter qualification requirements.
Ottawa also unveiled new measures aimed at portfolio insurance, a type of bulk insurance that banks use for mortgages with down payments above 20 per cent. Starting Nov. 30, the federal government will now require portfolio-insured mortgages to qualify under the same criteria used for traditional mortgage insurance used by homeowners with small down payments. Portfolio-insured mortgages will now be limited to a maximum amortization period of 25 years and a maximum purchase price of less than $1-million and excludes all properties that will not be owner-occupied, such as rental homes and investment properties.
Mr. Morneau also said he planned to release a consultation paper on “risk-sharing” for lenders who use mortgage insurance, thought to be in the form of a deductible payable by the banks on mortgage insurance provided by Canada Mortgage and Housing Corp. and other private sector insurers.
Soaring housing prices, especially in the red-hot markets of Vancouver and Toronto, have triggered a debate about the role of foreign money in Canadian real estate markets.
Ottawa has been preoccupied with the issue, with Mr. Morneau creating a working group to conduct a “deep dive” into the state of the housing market and make recommendations on policy.
Mr. Morneau’s announcement follows a Globe and Mail investigation that revealed a network of speculators flipping homes for profit and avoiding taxes by classifying them as principal residences.
In a bid to cool its hot housing market, British Columbia introduced a 15-per-cent foreign-buyers tax this summer which applies to the sale of all residential properties within 22 communities of metro Vancouver. The levy applies to buyers who are not Canadian citizens or permanent residents, and corporations that are either not registered in Canada or are controlled by foreigners, and adds $300,000 to the purchase of a $2-million home.
In the seven weeks leading up to the levy, foreign buyers accounted for 13.2 per cent of sales in Metro Vancouver. By contrast, just 0.9 per cent of all transactions that closed in the region involved foreign buyers in August, the first month in which the tax has been in effect. However, experts caution that the decline is skewed because many deals were rushed to avoid the tax.
The Canada Revenue Agency says it completed nearly 2,500 audits related to related to real estate in B.C. and Ontario between April, 2015, and June, 2016, and that the agency plans to do as many or more next year.
– credit to Shawn McCarthy and Kathy Tomlinson