New measures aiming to help first-time buyers afford homes won’t push prices up more than tenths of a percentage point, according to a report by Canada Mortgage and Housing Corporation (CMHC) on Thursday.
CMHC’s report estimated that home prices could go up between 0.2% and 0.4% – a small increase relative to other ideas the federal government was pressed to enact to make homes more affordable.
CMHC said that loosening the mortgage stress test or allowing longer mortgages would have raised home prices five to six times more than the measures included in last month’s budget, including the First-Time Home Buyer Incentive.
“For first-time home buyers, the ability to find the appropriate level of savings is very hard,” Jean-Yves Duclos, minister of Families, Children and Social Development, said when asked about the program. “So more housing available and more affordable housing, but also a greater ability of younger Canadians to eventually have a home — and that’s why I think this balanced approach is the right one.”
Despite the limits on the program, CMHC said that it could work in all markets, including Vancouver and Toronto. The average home price in the country is about $470,000, and the way the mortgage program is structured would allow buyers to purchase an existing home valued up to about $505,000 once they put in a 5% down payment.
About 23% of home sales in Toronto and 10% in Vancouver are for under $500,000, CMHC said, estimating that more than 2,000 buyers in Toronto and 1,000 in Greater Vancouver would have been eligible for the mortgage program if it had been available last year.
The program will make CMHC a minority owner of units through shared-equity mortgages, which are interest-free. When a home is sold for a profit, CMHC shares in the gains; the opposite is true when a unit is sold for a loss, according to a report by The Canadian Press.