First-time homebuyers program still short homebuyers

General Joanna Yang 21 Jun

First-time homebuyers program still short homebuyers

The federal government’s program to help first-time homebuyers is still helping far fewer Canadians than the program is supposed to, according to figures tabled in Parliament on Thursday.

The three-year, $1.25-billion first-time homebuyers program launched on Sept. 1, 2019, and is run by the Canada Mortgage and Housing Corporation (CMHC).

As of March 31 — halfway though the program’s lifespan — just $178 million had been doled out to 9,804 buyers, the data show.

Most successful applications were for mortgages valued between $150,000 and $350,000, well below the average selling price in Canada’s biggest cities.

When first announced, federal officials said the program could help as many as 100,000 Canadians. The incentive is in the form of a shared-equity mortgage. Qualified applicants can borrow either five or 10 per cent of a home’s purchase price and put the money toward a down payment, which can help lower monthly payments.

In order to qualify in most areas, applicants must earn less than $120,000 a year. The total value of the mortgage is capped at four times the prospective buyer’s annual income. In an attempt to boost uptake in major cities with high housing prices, the fall economic statement expanded eligibility in Vancouver, Victoria, and Toronto.

For buyers in those three census metropolitan areas (CMAs), the eligibility limit was increased. As of May 3, when the changes were implemented, the income cap was raised to $150,000, and the total value of the mortgage was allowed to be 4.5 times annual household income, instead of just four times in all other CMAs.

In May, the average home price in the Greater Vancouver Area was nearly $1.2 million, and over $800,000 in Victoria, both representing a year-over-year increase of more than 14 per cent. In the Greater Toronto Area, the average price was over $1 million, a nearly 19 per cent year-over-year increase, according to data from the Canadian Real Estate Association.

The changes in the economic update aren’t reflected in the recently tabled data, which cover only up to March 31. A spokesperson for Children, Families, and Social Development Minister Ahmed Hussen said it’s difficult to estimate the impact of the changes at this time, but Hussen expects they will “increase the number of eligible first-time homebuyers by several thousand.”

Most successful applicants — nearly 3,800 — are in Quebec. Albertans come in second, with just over 2,800 successful applicants. In British Columbia and Ontario, the two provinces with the hottest housing markets, each has had just 342 and 770 successful applications, respectively.

The new data show how unpopular the program has been in those cities. Just five homebuyers have qualified for the program in Victoria, nine in Vancouver, and 39 in Toronto. The program is most popular in Edmonton (1,288 successful applicants), Calgary (636), Winnipeg (446), Quebec City (419), Montreal (274), Halifax (259), and Saskatoon (200).

Similar figures were tabled in April for the period ending Jan. 31, 2021. At that time, $170 million had been dispersed to 9,108 applicants.

READ MORE: Few first-time homebuyers have qualified for federal incentive

The Conservatives recently urged the government to scrap and replace the program through an opposition-day motion, but didn’t propose an alternative, nor say how they’d fix the program. Conservative Housing critic Brad Vis said his party will release a detailed housing policy in the party’s next election platform, but the details haven’t yet been ironed out. One proposal he’s putting forward, similar to what the Tories promised in their 2019 platform, is to apply the mortgage-amortization rate for longer than its current 25 years.

Data released by Statistics Canada on Friday show Canada’s housing market continued its hot streak, with national prices up 1.4 per cent from April to May. Prices were also up in 19 of the 27 CMAs studied. Winnipeg led the way with a 5.1 per cent jump from April to May. Calgary was also hot, with a 3.7 per cent month-to-month increase, its fastest since July 2006. Lack of supply, rising construction costs, and a jump in the price of building materials such as lumber are contributing to the rise, StatCan said.

“With these massive price increases, we’re seeing a social divide emerge,” Vis told iPolitics on Friday. “Our economic system in Canada has been predicated on a pathway to home ownership, in large part. I don’t believe we should just give up on that ideal right now.”

Nationally, prices were up 11.3 per cent year-over-year in May, the biggest increase since November 2006, StatCan said. Prices were up in all 27 CMAs surveyed, with Kitchener-Cambridge-Waterloo, Ont., leading the way with a 27 per cent increase; Ottawa following with 25 per cent; then Windsor, Ont., with 21 per cent.

The Canadian Real Estate Association estimates that the national average home price will increase to just over $677,775 in 2021, with the average price in Ontario and B.C. nearing $800,000.

The Slowdown In Canadian Housing Continued in May

General Joanna Yang 17 Jun

The Slowdown In Canadian Housing Continued in May
Today, the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 7.4% nationally from April to May 2021, building on the 11% decline in April. Over the same period, the number of newly listed properties fell 6.4%, and the MLS Home Price Index rose 1.0%, a marked deceleration from previous months.

Activity nonetheless remains historically high, but in contrast to March’s all-time record, it is now running closer to levels seen in the second half of 2020 (see chart below). Month-over-month declines in sales activity were observed in close to 80% of all local markets. It was a mixed bag of results, with a slowdown in sales observed in most large markets across Canada.

“While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices,” stated Cliff Stevenson, Chair of CREA. “More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID would also be expected to fade at this point given where we are with the pandemic”.

New Listings

The number of newly listed homes declined by 6.4% in May compared to April. New listings were down in about 70% of all local markets in May.

The national sales-to-new listings ratio was 75.4% in May 2021, down slightly from 76.2% posted in April. The long-term average for the national sales-to-new listings ratio is 54.6%, so it remains historically high; although, it has been moderating since peaking at 90.7% back in January.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about a quarter of all local markets were in balanced market territory in May, measured as being within one standard deviation of their long-term average. The other three-quarters of markets were above long-term norms, in many cases well above.

As the chart below shows, Edmonton was one market in balance, and the Greater Vancouver Area was moving closer to balance, but others remain a seller’s market.

There were 2.1 months of inventory on a national basis at the end of May 2021, up from a record-low 1.7 months in March but still well below the long-term average for this measure of over 5 months.

Home PricesThe Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 1% month-over-month in May 2021 – a noticeable deceleration. The most recent deceleration in month-over-month price growth has come from the single-family space compared to the more affordable townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 24.4% on a year-over-year basis in May. Based on data back to 2005, this was another record year-over-year increase; although, it is not likely to go much higher.

While the largest year-over-year gains continue to be posted across Ontario, this is also where month-over-month price growth has been slowing the most. Meanwhile, price growth has continued to accelerate in some other parts of the country, thus reducing the year-over-year growth disparity between Ontario and other provinces.

Bottom Line

The near-uniform nature of the housing market activity (in what is usually a highly regionalized market) is still a key feature of this cycle. Indeed, 22 of 26 markets tracked by CREA saw sales fall in May, while all but one market saw the average transaction price up by double-digits from a year ago (sorry, Thunder Bay). Among the tightest markets in the country based on the sales-to-new listings ratio are the Okanagan and Kawartha Lakes; cottage country is still on fire.

The two-month slowdown in Canadian housing is welcome news. The OECD recently released a report showing that New Zealand, Canada and Sweden have the frothiest housing markets in the world. The UK and the US are near the top as well. Clearly, COVID led many around the world to alter their abode, driving prices higher almost everywhere.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca