Liberal's pre-election federal budget provides limited relief for first-time homebuyers

Low inventory remains the biggest challenge for those competing to enter the local market

The federal Liberal's have released their pre-election budget chalked full of promises should Canadians chose to give them a second mandate this coming October. A couple of proposals included in the budget were aimed squarely at millennials looking to get into the housing market. Both the First Time Home Buyers Incentive along with the increase in RRSP withdrawal limits could offer minimal relief locally.

The First Time Home Buyers Incentive proposes that households with a combined income of $120,000 or less can qualify for a 10 per cent shared-equity mortgage with the Canada Mortgage and Housing Corporation. The 10 per cent is for new starts and reduced to 5 per cent on resale homes, which are more commonly sought after/available locally by those entering the housing market. This interest-free loan (funded, of course, by Canadian taxpayers) is for purchases up to $480,000 (capped at four times a households annual income). The loan would be paid back upon a future sale of the property, although the budget does not address what would happen if the property sells at a loss. This incentive is irrelevant in big city markets like Toronto and Vancouver but will provide some relief locally on resale properties. Finding an entry-level new build under $480,000 in Waterloo larger than a 600 square foot condominium would be like creating a fits all solution for the St. Patrick's Day party on Ezra Avenue. I wish you luck.

The RRSP withdrawal limit will increase from $25,000 to $35,000 for the first-time buyer. This incentive extends to those exiting a marriage or living common-law. It is a sound update, but how many millennials indeed have $35,000 in their RRSP? The TFSA introduced in 2009 is a more popular form of savings for millennials and in my experience is where most of my first-time buyers are drawing down payment fund from when it comes time to purchase.

If you are currently shopping, or know someone looking for a home in Kitchener and Waterloo somewhere in the $380,000 - $500,000 price range, you know inventory is tight. One only needs to look at recent sales (Sandra Avenue, Kitchener, Washington Avenue, Waterloo, Rodney Street, Waterloo and so on) to spot clear signs that the buyer pool is very intense. It's possible the incentives could add more competition to an already crowded field of buyers here in town.

Inventory is genuinely the most significant challenge we are facing here in Waterloo. On this front, the proposed budget includes $300 million for a new 'Housing Supply Challenge' for stakeholders to offer solutions. It is a cute idea, but opening up land for new housing is often met with resistance from environmental groups and those hamstrung on urban sprawl in the Waterloo Region.

Pre-election budgets are often designed to offer Cadillacs with the illusion of costs being closer to Chevy pricing. The federal election is still many months away, and there is still hope that important housing policy proposals (like eliminating the mortgage stress test) may come from the other federal political parties. In hot housing markets like Waterloo, first-time buyers deserve options.