For a young person who contemplates the real estate market, it is surreal this idea that one might once buy a house spontaneously, following a first crush.
Today, the steps to access property take on the air of a five-year plan, the financial package increasingly requires the involvement of parents, when they have the means.
This does not bode well for the homeownership rate which, according to Statistics Canada, fell for the first time in Quebec between 2016 and 2021, in times that were more favorable for buyers.
If young people still dream of it, how might we facilitate their access to property?
This is not obvious.
Ideas to facilitate the application
The theme was barely touched upon during the election campaign. There are the Liberals of Dominique Anglade who proposed to increase from $35,000 to $50,000 the sums that can be withdrawn from RRSPs through the Home Buyers’ Plan (RAP).
If only this decision was not a federal one and a more beneficial program was not regarding to be launched (the tax-free savings account for the purchase of a first property, the TFSA) , that wouldn’t be a funny idea.
The same liberals also promise to pay the property transfer tax (the “welcome” tax) for first-time buyers, which makes more sense. Will an exemption of a few thousand dollars attract more young people to home ownership? I have my doubts, although such a measure would certainly relieve young people, for whom this tax has the effect of a crushing blow.
It’s like the tax credits for the purchase of a first home, offered by both Quebec and Ottawa. The federal government doubled its, from $750 to $1,500. Quebec might imitate it (a promise of the CAQ). In view of real estate prices, these credits remain derisory. They barely cover moving costs, they have no bearing on market dynamics.
Restoring the possibility of amortizing insured mortgage loans over 30 years might, on the other hand, have a real effect, this is a matter for the federal government. Amortization is currently capped at 25 years. Five more years would reduce the weight of debt service in the budget of new owners.
Another idea: set up a mechanism that would allow parents to dip into their RRSP without too much tax impact if the money is used to purchase a first property for a descendant. It would be a kind of intergenerational RAP. But hey, with the RAP and the CELIAPP, it’s already complicated…
We need to boost supply.
Combined, these measures would no doubt facilitate home ownership. But for how long ? It’s like building a new highway to decongest the road network. It’s a relief at first, but the good news quickly attracts more motorists. And the congestion is back to how it was before.
“It is certain that these proposals have the potential to feed inflation in the real estate market”, recognizes the one who promotes them, Paul Cardinal, director of the economic service of the Association of construction and housing professionals of the Quebec (APCHQ).
In other words, the solution also and above all depends on the offer, according to the economist. Take taxes on new construction. Ottawa refunds a portion of the GST on new homes between $350,000 and $450,000. Reimbursement is regressive. It starts at 36% on a purchase of $350,000, and decreases until it disappears at $450,000.
We find the same system in Quebec. The State refunds 50% of the QST on new homes of… $200,000, a gift that disappears when the price reaches $300,000.
“It no longer reflects the reality of the market,” notes Paul Cardinal. However, a reduction in taxes on new homes would make them more attractive to buyers, which might encourage construction.
Nor should we expect miracles. Because if buying a home has become complicated, building one is sometimes a Kafkaesque adventure.
Also, we are no longer in the years when we might do anything. We now want to contain urban sprawl, preserve green spaces and wetlands on municipal territory. It would be necessary to densify in the sectors already built, but the densification projects meet the resistance of the established populations and certain elected municipal officials.
Not easy. The issue deserves more than “measurements”.