Vancouver Homes So Pricey That Government to Lend Down Payments
The province of British Columbia will start a program on Jan. 16 that will offer to match the nest egg amassed by buyers for their first house by up to C$37,500 ($28,000) or 5 percent of the purchase value, B.C. Premier Christy Clark said at a news conference. It’s estimated to cost about C$703 million ($526 million) over the next three years and help about 42,000 households enter the market.
“People need a partner in scraping up that first down payment,” said Clark, whose Liberal Party faces re-election in May and is seeking to address a public outcry over housing unaffordability. “It’s getting harder and harder all the time.”
The Pacific Coast province is home to Vancouver, Canada’s most expensive real estate market, where the price of a typical single-family home has surged to C$1.5 million. The province imposed a 15 percent tax on foreign buyers in August, while the federal government tightened mortgage rules in October, which have taken some heat out of prices, but they remain about 20 times median household earnings.
Under the new first-time buyer program, the 25-year loans will have no interest and no repayment for the first five years. The province expects more than 40,000 households to seek the loans and is setting aside C$703 million over the next three years for the program, according to a statement.
The program may only “incrementally help” home sales in B.C. and may be more positive for mortgage insurers like Genworth MI Canada Inc. than lenders, RBC Capital Markets said in a note to clients after the announcement.
The program doesn’t solve the core problem of really high property values next to relatively low incomes, said Andy Yan, Director, City Program, at Simon Fraser University.
“The metro Vancouver area is the most indebted metropolitan area in Canada. What does this C$37,000 enticement do but encourage people to take on more debt?” Yan said by phone.
British Columbia will fund the loans with revenue from property taxes, including money it has amassed from the recent tax on foreign buyers, Clark said. The province expects to continue balancing its budget, she said.
The loans will only be available to first-time buyers who already qualify for a mortgage under the recent, stricter rules introduced by the federal government.
“Homebuyers will still have to qualify for a mortgage,” she said. “There are those who can qualify for a mortgage but can’t scrape together the down payment. Those are the ones we’re trying to help.”
The program will also be restricted to households earning up to C$150,000 and purchasing a property that’s worth C$750,000 or less. They also must have been Canadian citizens or permanent residents for at least five years and residing in the province will qualify.