New Government, New Times? – Affordable housing canada
The national elections in Canada were a big surprise to the pollsters and the pundits, who expected a minority government to emerge, as the NDP backslide had left things neck-and-neck between the Conservatives and the Liberals. However, things turned out much differently, as Canadians sent a Liberal government to Ottawa, under the leadership of Justin Trudeau. This is not the Liberal Party that ran the country in the 1990s, acting very much conservative as they trimmed federal spending to historically low levels. This is a party that has hewn hard to the left, as Trudeau has promised to legalize marijuana, cancel military contracts and spend $250 million per year to resettle the 25,000 new refugees from Syria that the nation has promised to take in under Trudeau’s leadership.
So what does this mean for the mortgage market? As with many seismic changes to a nation’s economy, Trudeau’s planned moves will have a significant impact on people’s access to money. The Liberals have already said that balancing the national budget will not become a priority until 2019. The nation is about to spend a lot of money, which could make the bond market more interesting. The fact that government debt will expand could mean that higher long-term interest rates will become available. This also means that fixed mortgage rates could creep up as well.
This also means that the prime rate is likely to stay where it is, or even go up. When the government spends money, the economy does not need cuts in the interest rate to see a growth in activity. This means that there is a considerable possibility that interest rates will go up between now and October 2016. This will increase the cost of borrowing money and make mortgages more accessible. This could depress housing values a bit, as the total cost of buying a house will go up. However, it won’t ease the overall cost of buying that house. If prices stay low, that could mean that some value buys are available, and you can take advantage of that value price until interest rates go back down, and then you can sell for a tidy profit as housing values go back up with the lower interest rates.
It looks like the Liberal government will put some more programs in place to help first-time home buyers get access to the market. This could take a number of different forms, such as elevated amortization caps for people buying homes for the first time.
The Liberal platform contains a review of the housing policies at work in the expensive markets. The new government has said that they will take a look at any and all policy proposals that make the ownership of homes accessible to more. This is a fairly vague promise so far, but it is also fairly wide in scope. So for now, potential homeowners have to wait and see what comes out.
This could work out well for renters and people who invest in real estate for income, as the Liberals have promised that they will direct CHMC to release financing that will go to fund construction of new units designed for rental housing.
Trudeau’s government has also said that they will widen access to the Home Buyer’s Plan through RRSP, especially for people buying homes right after going through significant events in life, such as the death of a spouse, divorce, or illness in the family. If people have more access to different types of funding for their down payments, this will increase housing sales totals and the percentage of home ownership. This will also provide some support for home prices.
The Liberals also plan to put a new Minister of Finance in office. This person, among other responsibilities, has considerable powers over regulating the housing market. Joe Oliver, who is set to leave the position, took a laissez-faire approach to mortgage policy for the nation. It’s not likely that the Liberal replacement will be as hands-off in this area as Oliver was. We may not know exactly how much of a change to expect in regulations of the housing market until the government publishes its 2016 budget. For now, though, the combination of increased access to home ownership and potentially increased interest rates makes the home market both more exciting and more intimidating, as it looks like home ownership will be open to more — but will cost everybody more, as well.