The big intervention in the real estate market in 2016 was the foreign buyers tax.
After years of laissez-faire politics, the provincial Liberals slapped a hefty tax on non-citizen buyers in Metro Vancouver, in an attempt to cool an overheated market.
This year it’s the carrot instead of the stick, as housing minister Rich Coleman announced the official start of the new BC HOME Partnership this month.
BC HOME gives first-time buyers up to $37,500, or five per cent of their purchase price, on a new home. The money is a loan, but it’s interest- and payment-free for the first five years.
The foreign buyers tax was controversial, but it seems to have had an effect. In the back half of 2016, prices in the Lower Mainland stabilized, and in some places rolled back.
The BC HOME project will be harder to measure. We hope it will work as the government intends – giving those in their 20s and 30s just trying to get into the housing game a leg up in a market that remains wildly unaffordable.
But as with the foreign buyers tax – which also penalized local foreign nationals working ordinary jobs along with wealthy overseas investors – the new program could have some drawbacks.
The most obvious concern is that even without interest at first, that five-year deadline will act like a balloon payment. How many people will take advantage of it now only to find they can’t make the payments in 2022?
Worse, it could run counter to the general cooling of the market. If young people do use it in large numbers, prices on starter homes such as condos and townhouses could climb – a trend that was already underway. And that will just lead to more buyers priced out.