Today we will review some of the policies that have been put forth by the different parties and offer a few thoughts on each.
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| Source: CBC |
This has repercussions for the housing market dynamics. Obviously this would increase demand for purchases and decrease demand for rentals. All other things equal this would increase pressure on home prices and increase vacancy rates on apartments. Another item of note is relating this to the experience of the US in the 2000s as home ownership peaked at just under 70% and that lead to the eventual housing crash and has seen home ownership decrease to around 63%.
2) Increasing the Home Buyers’ Plan (HBP) from $25,000 to $35,000: This is the program that allows you to withdraw money from your RRSP, tax-free, if you’re buying your first home. The Conservatives have promised to increase the amount you can withdraw by $10,000, giving you more room to save for a down payment.
This makes a lot of sense considering many markets in Canada have seen rapid price appreciation and the $25,000 doesn’t go as far as it used to in helping for down payments. On the downside, it takes funds away (temporarily) from retirement savings.
3) Introducing a permanent home renovation tax credit: A temporary credit was introduced in 2009 to help boost the economy, and the Conservatives have now promised to make it permanent. The proposal would give homeowners a tax credit on home renovations costing between $1,000–$5,000.
This will encourage people to reinvest in their homes and boost the construction industry. People always seem to have home improvement projects they are wanting to do and this incentive might push them to pull the trigger. On the flipside, the timing of this might be wrong with home prices at all times highs.
4) Collecting data on foreign investment: As foreign investors continue to take the blame for Vancouver’s skyrocketing house prices, the Tories promise to get to the bottom of it. They’ve pledged federal money to pay for research that probably should have been done years ago anyway.
This is a complex issue but it is no doubt playing a role in the market. We are seeing this not just in the housing market but also in commercial real estate as international investors have rolled in. You don’t want to discourage investment in Canada but don’t want to price citizens out of their own markets either.
5) Creating $125 million per year in tax incentives for landlords: Part of the Liberals’ “social infrastructure” plan is a substantial tax break for developers and landlords to build and renovate rental housing. The plan includes a GST rebate and government-backed financing for purpose-built rental developments.
The apartment building stock has been aging in Canada for years as new construction hasn’t been economical. This could help change some of that, leading to increased rental supply as developers consider building apartments instead of condos.
Depending on how the election plays out, it is possible most or none of these policies see the light of day. But healthy policy debate is always good for our country.
What do you think of these policies and the federal election? Let us know in the comments!
To catch up on the election, click here.
Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620
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