Home Price Economics & BC’s Interest Free Loans Category: First Time Buyer, On December 15, 2016, the Government of British Columbia announced the <strong>BC Home Owner and Equity PartnershipBC HOME Partnership) to help first time home buyers with their mortgages. The plan is to provide interest free loans that can be put toward down payments. The Province’s goal is to provide repayable downpayment assistance loans to first time home buyers. This is supposed to increase affordability. In a previous lengthy blog article, I wrote about the program’s finer details. Below is a summary of my main points: The program will have almost no impact on home buyers’ affordability.Home prices will not be pushed up!There was no consultation. Even today, more than two weeks after the announcement, not one lender has verified they will allow this program.In order to increase affordability, the city, and not the provincial or federal governments, needs to increase supply. This can be done with rezoning. I applaud the BC government for trying. However, I think that they misjudged and came up with an inappropriate solution to a very complex program. Demand Side Economics Affordability for first time home buyers (and second time home buyers, for that matter) is a big issue. Affordability can be broken down into two camps: supply and demand. I love economics!! Give me a call if you want a crash course The image to the left shows what happens when there is an increase in demand based on a certain supply – the prices increase. In 2015 and 2016, Vancouver real estate saw record demand and housing speculation ran rampant. The “crazy” demand increased property prices to unprecedented levels. In response, both provincial and federal governments instituted demand-side regulations to curb property appreciation (some of these measures addressed the belief that offshore buyers played a big role in the burgeoning housing prices). If the demand had actually been curbed, D1 would have returned to D, but that didn’t happen; prices have stayed high. This happened because demand side changes decrease affordability for most and hurt the average consumer the hardest; in other words, many affluent buyers were/are still able to purchase! In 2016 alone, the demand-side measures have been: Stress Test and Decreased AffordabilityBulk Insurance Changes: Complexification of Mortgage RatesIncreased Property Transfer Tax for ForeignersVancouver Empty Homes TaxCapital Gains Exemption Loophole Closed The demand-side measures above have been successful in decreasing the number of sales but not average prices. Yes, prices have decreased slightly on the very high end ($2+ million) but they have not moved at lower prices. A recent article from the Real Estate Board of Greater Vancouver states that new listings are now inline with the region’s 10-year average. However, in the same article, we have sales-to-active listings at around 26%. “…downward pressure on home prices can occur when the ratio dips below 12% for a sustained period of time, while prices experience upward pressure over 20%.” Supply Side Economics On the supply side, however, we have had some, but very limited success (as compared to size of the problem): Vancouver Laneway Homes: 2,500 have now been approved.Cambie Street Corridor has been rezoned and is being developed.Oakridge Centre (when will this happen?), The River District, and much more… Much more needs to be done in order to increase supply of housing! From what I’ve read, UBC Professors Tom Davidoff and Tsur Somerville have excellent views. Want the best mortgage broker Vancouver has to offer? Get in touch with us today! Continue Reading: Read Article Sizing Up Vancouver's Wooden Skyscrapers Category: First Time Buyer,Real Estate Agent,Renew Refinance, The high-rises that make up our beautiful skyline are built primarily with steel and concrete. That’s the way it’s been for much of the twentieth century. However, one of our oldest materials has experienced a renaissance in recent years: there’s a growing movement of using timber to build towers. Why Wooden Skyscrapers? They are energy […] Read Article Read Article BC Interest-Free Mortgage Loans Explained (Finally) Category: First Time Buyer,Renew Refinance, On December 15, 2016, the British Columbia government announced the BC Home Owner and Equity Partnership (BC HOME Partnership) to help 1st time home buyers by providing interest free loans to help with down payments. The Goal (as per the Province) To provide a repayable down payment assistance loans to 1st time home buyers. The Goods Must […] Read Article