Interesting read (check out the link below) from MoneySense Magazine.
Yet another nutty idea brought to you by the Canada’s federal Department of Finance.
Of particular note:
“…Any policy change that restricts housing purchases won’t actually address the biggest problem facing Toronto and Vancouver: a lack of supply.”
“Finally, by creating a tiered down payment system, the government could artificially increase demand for homes valued under $500,000. Buyers who don’t have 10% saved up for home over $500,000 may opt to pursue a purchase in the lowest down payment tier (homes that are $500,000 or less). An increased number of buyers for these homes will create increased demand and this could, eventually, lead to price increases.”
One thing the article failed to mention is that homes below that $500k threshold are also typically the ones that investors target as investment properties as they are highly sought after by seniors, low income earners and Millenialls alike. If demand for these go up, followed by price increase, so too will monthly market rental rates! So indirectly, the federal government will in effect further increase the cost of living to those segments of the population who can barely afford to support themselves now on their meagre incomes, if they decide to move forward with this bright idea!
Unfortunately, this will also mean more competition to buy these homes as investment properties, given that many first time buyers in places like Toronto will no longer be able of buying low rise houses as average costs for a low rise home in Toronto today is already over $700k and will therefore require 10% down regardless under these potential changes proposed!
This means more first time buyers who still wish to buy a low rise home will be flooding our main investment property target areas today. This will exasperate an the already red hot markets there!
Those who already own properties in these areas will definitely benefit. Those hoping to get in soon will find it even tougher to do so. Those who are still a few years out before being able to put a sufficient down payment for a home in these target areas may simply lose their chance for cash flow positive investment properties there and will instead have to look even further away from Toronto to find homes that make sense to them financially to either occupy as principal residence or as investment properties.
More importantly, the impact on those who are already having a tough time finding affordable housing, regardless of whether they are looking to buy or rent, will be most affected. This includes, Millenials, low income earners and seniors who are already feeling the pain.
They will have an even tougher time finding, buying or renting an affordable home moving forward.