Liberals also plan to support affordable-housing construction and repairs, vowing to invest in 1.4 million home units over four years
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The Liberal Party is proposing to place a freeze on foreign home buying and to ban blind bidding as part of an election housing platform aimed at improving affordability in Canada’s major cities.
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Party leader Justin Trudeau unveiled the platform in a speech to media in Hamilton, Ont., Tuesday.
The ban on foreign home buying would take place over two years and would be aimed at limiting speculation by real estate investors living outside of the country, mirroring a promise that the Conservative Party made last week when they released their platform.
Nothing could be more short-sighted than telling the world that Canada is a closed economy that doesn’t welcome off-shore investment
Rob McLister
The Liberals also plan to support affordable-housing construction and repairs, vowing to invest in 1.4 million home units over four years. That figure includes the conversion of empty office spaces into housing, spending on Indigenous housing and the introduction of a renovation tax credit for those adding secondary units to homes.
The plan also targets speculation with a temporary ban on “house flipping” and aims at promoting price transparency by banning “blind bidding” through a Homebuyers’ Bill of Rights. Blind bidding is a process in which multiple prospective homebuyers compete for the same property without knowing how much others have offered.
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The real estate market desperately needs transparency
Rob McLister
The bill unlocks other rights that have been an issue for home buyers, like the right to have a home inspection and access to a history of more recent home sale prices.
Other measures include establishing a tax-free First Home Savings Account for Canadians under 40 allowing them to save as much as $40,000 to put towards their first home with no repayment required; doubling the First-Time Home Buyers’ Tax Credit from $5,000 to $10,000; slashing the monthly Canada Mortgage Housing Corporation (CMHC) insured mortgage cost by 25 per cent; as well as cracking down on vacant homes with tax penalties.
Benjamin Tal, deputy chief economist at CIBC Capital Markets, told the Financial Post that investing in housing supply solutions in major unaffordable cities was the right idea.
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“(These measures are) a move in the right direction as some of the measured are aimed at supply. More money to municipalities is important and constructive as that’s where we have significant supply bottleneck issues,” said Tal in an e-mail.
Tal added that the ban on “house flipping” and barriers to foreign investment in housing could have marginal impacts, though he does not expect them to be game-changers when it comes to alleviating price pressures.
The tax-free account for young first-time home buyers and the lower rates on insured mortgages (which Tal noted are quite low already) will only have a minimal impact on affordability, Tal said. However, he expressed concern that the mortgage rate cuts may leave some households more exposed to higher interest rates down the line, noting that their sensitivity to rate changes is already quite high.
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“Overall, the package is significant and should, over time, result in some improvement in affordability. No package can completely reverse the situation, but that array of measures should be seen as a good step in the right direction as it recognizes that supply issues are important,” Tal said. “I would like to see more help and incentives to support purpose-built rental construction in order to establish a sound a reliable rental market as part as an overall affordability strategy.”
Rob McLister, mortgage editor at RatesDotCa, told the Financial Post that some of the policies, like a Home Buyer’s Bill of Rights and taxing foreign-owned vacant land in large urban areas, make sense to him.
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“(The Home Buyer’s Bill of Rights) is long overdue,” McLister wrote in an email. “The real estate market desperately needs transparency. That’s how efficient price discovery happens, and yes, things like open bidding, mandatory inspection periods and transparent public comparable sales data will materially slow overvaluation.”
McLister added that there was little economic reason to allowing foreign land banking in Canada to go on for years on end. However, there were policies that left McLister scratching his head, such as creating a tax-free First Home Savings Account, which he called “another needless government program requiring taxpayer dollars to administer”; down payment loans as part of the First-Time Home Buyer Incentive adjustment; and outright banning foreign ownership in the country.
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“Nothing could be more short-sighted than telling the world that Canada is a closed economy that doesn’t welcome off-shore investment,” McLister said. “This drop-in-the-bucket solution is an idea dreamt up by vote-obsessed politicians. Non-resident ownership is a small single-digit share of housing…. Canadians should welcome every well-off foreigner we can to lift economic activity, while simultaneously boosting housing supply to offset any small impact their home ownership might have.”
Last week, the Liberals’ rivals released their platforms. The Conservatives pledged to construct one million homes over three years, put a two-year ban on foreign housing speculation, make changes to the mortgage stress test. The NDP vowed to build 500,000 affordable homes in a 10-year span, re-introduce 30-year CMHC-insured mortgages on entry-level homes, impose a 20 per cent foreign buyer tax, increase the homebuyer’s tax credit to $1,500 and waive the federal portion of GST/HST construction costs on new rental units.
• Email: shughes@postmedia.com | Twitter: StephHughes95
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