The new ‘First time Home-Buyer incentive’ program. Will it help?

The much anticipated budget release yesterday by the Federal Liberal party turned out to be of little value for home buyers in Toronto. Obviously it’s too early to tell how successful such a plan will be, but I have doubts it will be anywhere near the 100,000 households over three years the government seems to think will take advantage of it.

It should be noted that British Columbia tried a similar plan a few years back and it was cancelled in 2018 after failing miserably.

For taxpayers across Canada, it’s added more risk through CMHC and the potential for losses covered by the Federal program. But then again, CMHC fees on uninsured mortgages have been as lucrative for the Feds as cocaine is for drug cartels.

For first time-buyers in the Toronto area, forget about this budget. The reality is, it won’t be of any help to you.

On the resale buying side, if you were purchasing a property for $400,000 and had saved 5% for a downpayment, the government would partner with you up to a maximum amount of 5% ($20,000) and in theory, you would be purchasing with a 10% down payment.

It’s not clear if the CMHC fees would be paid at the 5% amount invested, or the 10% total? Oh yeah, as it’s currently proposed, you are partners with government on any increases or losses when it comes time to sell. Also not clear is at what stake. Is it a 50/50 partnership?

The program is capped at the max of $120,000 income x 4, which equates to $480,000.00. Good luck on finding much in that price range. Actually, for those on the cusp, it could be argued that your government just screwed your chances of getting into the market as prices will certainly rise due to the changes.

Oh yeah, even know the fine print hasn’t been disclosed on many parts of the program, it wouldn’t take effect until the fall of 2019.

It seems the government is trying to force people into the new construction side of the market. Here the incentive is higher and the government will pony up to 10% ($40,000). Which for them makes sense, as all levels of government rake in lottery sized winnings on fees collected from development charges, permits and taxes.

Who should rejoice? Homebuilders for one. They have been raking it in for years and as of late, the slowdown in new construction sales has hit them hard. For the rest of the market and economy, it’s going to be wait and see.

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