In this years budget, the federal government has outlined housing as the primary focus of their new spending plan. With home prices increasing on average by more than 60% over the last 2 years, many were calling on the government to act in order to try cool the red hot real estate market. In particular the province of Ontario has seen the largest shift in pricing where in some areas price increases have exceeded over 80% in the same period.
The biggest issue driving up prices is the lack of housing supply. Fundamentally, there simply needs to be more access to a larger supply of various home types to meet the needs of those out there looking for a home. In the past 10 years approximately 2 million homes have been constructed in Canada. In the 2022 budget, the government has ear-marked over $10 Billion across various initiatives to try to double these construction targets. Most notably, $4B for the CMHC to create 100,000 new units, an additional $1.5B to new affordable housing units and $3B for repairs to existing units.
Secondly, addressing overall affordability, the federal government hopes to make it easier for young Canadians to access home ownership with a new tax-free savings account specifically designed for first time home buyers. Starting next year, Canadians will be entitled to contribute up to $8,000 per year to a Tax-Free First Home Savings Account program, with a lifetime limit of $40,000.
Ottawa is also taking direct aim yet again at foreign buyers through a proposed two-year ban on the purchase of real estate by people and companies who aren’t citizens or permanent residents of Canada. Also outlined was the tighter enforcement of tax on home flipping or anyone buying or selling a property within a year.
Many are giving the thumbs up to the federal governments latest approach. However, for those looking to buy in the short term, with inflation high and supply in key markets still low, it makes it difficult to see how this will have any type of significant impact in the short term.
Analysts are also now expecting rising interest rates to have the most immediate effect on slowing the price growth in most major markets across the country. The Bank of Canada is expected to announce additional rate hikes next week.
If you would like to know more about the latest federal budget and how it's likely to impact home prices in your specific area, feel free to contact me anytime via email at turntotammy@gmail.com or by call or text at 416.725.5051.
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