Increase to Minimum Down Payments
Today, the government announced its intent to raise the minimum down payment requirements on homes valued over $500,000. Requirements will remain at 5 per cent down payment for homes under 500,000. Any amount over $500,000 will require a 10 per cent down payment. For example a $700,000 home will require a $45,000 down payment, 5 per cent on $500,000 and 10 per cent down on the remaining $200,000. The announced changes will take effect on February 15, 2016.
The government cites its desire to “contain risks in the housing market” as the reason for its decision.
As you know, the issue of an increase to minimum down payments is something CREA has effectively and successfully fought against since 2011. We are very disappointed with this decision and have communicated to the government and the media our concerns. That said, we believe the tiered approach the government is taking is preferable to an increase in minimum down payments for all consumers, given the importance of first time homebuyers to the market and the economy.
CREA will continue to advocate for homebuyers, sellers and members on this issue. Members should watch their inboxes and the REALTOR Action Network (RAN) for developments on this file.
CREA’s media lines can be found below, Boards and Associations should feel free to engage with local media.
Canada’s housing market is a key component of Canada’s overall economic stability and an important job creator.
In 2015 each home sale generates an estimated $51,409 in spin-off spending. This translates into one job for every three transactions. Home sales and purchase in 2016 will add an estimate $26 billion in spin-off consumer spending and creates nearly $183,000 jobs.
Indeed, our economy grew at 2.3 per cent in the last quarter, and home sales and purchases were a significant reason for that growth.
Given the tools available to the government to intervene in the housing market we believe today’s announcement will cause unintended collateral damage to markets beyond Toronto and Vancouver.
It could turn buyers and balanced markets into distressed markets, at a time when our economy is struggling.