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Jameson Berkow

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It has been a busy year for government intervention into the Canadian real estate market, and not just the hottest Toronto and Vancouver regions as many of the policy changes impact homebuyers across Canada. Below, BNN looks back at the highlights of 2016 Canadian housing policy.

Feb. 15 - Down payment hike – Announced in December of 2015, Ottawa raised the minimum down payment requirement for homebuyers to 5 per cent of the purchase price up to $500,000 and 10 per cent of any amount above that level. Previously, homebuyers were only required to pay 5 per cent of the total price of the home in advance. The goal was to encourage prospective homebuyers not to overstretch their budgets as bidding wars in especially hot housing markets become increasingly commonplace.

Aug. 2 - B.C. foreign buyer tax – Announced just one week in advance of the new tax taking effect, the measure required anyone buying a home in the Greater Vancouver area who was not a Canadian citizen or permanent resident to pay an additional 15 per cent tax in addition to all the existing costs associated with a real estate purchase. The levy equated to roughly $300,000 for an average-priced detached home in Vancouver.

Oct. 17- Rate hike stress test – Prices in Canada’s hottest housing markets have been rising in part due to historically-low interest rates keeping monthly payments down. Bubble concerns have been focused on the possibility of higher interest rates pushing hundreds of thousands of Canadian households into default territory. In hopes of offsetting that possibility, Ottawa implemented a measure that required homebuyers to qualify for the Bank of Canada’s posted five-year rate of 4.64 per cent, even if their actual mortgage rate would be half that level or less.

Oct. 21 - Lender risk sharing (proposed) – Not since the Canadian mortgage insurance system was set up in 1954 have the country’s largest mortgage lenders been asked to share the risk of homebuyers defaulting on their payments. But that could change in 2017. Under the current system, lenders are reimbursed for any losses stemming from homebuyers unable to make their payments through insurance policies from the government-owned Canada Mortgage and Housing Corporation (CMHC). The proposal for lenders to absorb a portion of those losses themselves was outlined in a 22-page public consultation paper released by Ottawa in late October, with the idea being lenders would be less willing to offer mortgages to riskier borrowers if they are on the hook for a portion of potential losses.

Nov. 14 - Ontario doubles first-time homebuyer land transfer tax rebate (announced) – Under intense pressure to address falling affordability in housing markets across Ontario, especially in the Greater Toronto Area, the provincial government doubled the land transfer tax credit it offered to first-time buyers. However, the measure amounted to an extra $2,000 or 0.26 per cent of the $762,000 average price of a Toronto home. The higher rebate takes effect on all purchases made on or after January 1, 2017.

Nov.16 -Vancouver vacant homes tax (approved) – Lack of supply is clearly a part of what is driving up prices in the Vancouver housing market – the only argument is over how significant a part. In hopes of bringing more supply into the system, the city approved Canada’s first-ever vacant homes tax that, starting in 2018, will require owners of properties deemed vacant for 12 or more months. Roughly 11,000 Vancouver homes were vacant in 2014 and 2015, according to an internal city analysis, with 90 per cent of them being condos. The tax will be equivalent to 1 per cent of a home’s assessed value, meaning the owner of a $400,000 vacant condo will need to pay an additional $4,000 in taxes should they choose to keep the home vacant.

Dec. 15 - B.C. Down payment loans for first-time homebuyers (announced) – After making several moves to limit demand in Vancouver’s hot housing market, the government moved in the opposite direction by offering first-time homebuyers up to $36,500 in loans matching their own savings to help with down payments. 

While the loans are being offered require no payments of any kind for the first five years, both principal and interest payments begin in year six.  Critics point out this will only increase the total debts among Canadian households, which are already sitting at record levels on average across the country. Applications begin Jan. 16, 2017.