Liberal Government To Make Home-Buying Easier For Millennials?

Toronto Politics

9 minute read

January 28, 2019

Man, does this ever make me hate politics.

And politicians, for that matter.  The saying “Hate the game, not the player,” doesn’t apply in the dirty, backwards world of pandering to the public in the interest of self-preservation.

Because that’s what politics is, right?  Self-preservation.

You’re naive if you think that any political party or any politician is more concerned with the best interests of constituents, over their own best interests.  It’s that inherent conflict of interest that makes politics completely self-defeating.  We elect these people, in theory, to make decisions on our collective behalfs, based on our collective well beings.  These people, in turn, are paid for their work.  If these people were not elected, they would not be paid.  And thus, their election is their priority, above all else.

In my humble opinion, what we’re seeing right now with respect to the federal Liberal government’s announcement last week that they would make home-buying easier for millennials demonstrates exactly that paradox.

And it’s so tragically ironic, considering that the federal government’s policies are exactly what made home-buying more difficult in the first place.

This bothers me so much.

And yet I know that simple-minded voters who merely read headlines, and not actual stories, let alone do their own research and take ten minutes away from Instagram to read up on the politicians they’ll actually cast votes for, will likely buy the rhetoric that Bill Morneau is spinning, and by the time the election rolls around in the fall, reward Mr. Morneau and Mr. Trudeau for making promises they never intend to keep.

I’ve come to realize that “liking” a politician or political party is far more difficult than disliking one.

I think it should come as no surprise to anybody who reads my blog that I don’t particularly like the current federal Liberal government, nor do I like the politician and leader at the helm, Justin Trudeau.  But that doesn’t mean I dislike the party; I’ve voted Liberal before, who hasn’t?  And it also doesn’t automatically mean I like Andrew Scheer and/or the federal Conservatives.  On that, I remain completely and utterly undecided, but in lieu of suitable alternatives to Morneau, Trudeau, and the liberal policies nationwide, I almost become a Conservative voter by default.

And that’s how so many political parties come to be in power!  By default!

The federal Liberals themselves rose to power because they were the default option to Stephen Harper, a Conservative.

And the provincial Conservatives rose to power because they were the default option to Kathleen Wynne, a Liberal.

Politics is just a big shell game, and we are merely pawns.

And we pawns are eating up this Liberal rhetoric about affordable housing, right at the perfect time!

On Tuesday, Finance Minister Bill Morneau announced that the Trudeau government is “looking for ways” to improve affordability in the housing market among millennials.

The comment came seemingly out of nowhere, as Mr. Morneau was at a function in Aurora, and was asked specifically if the government had any plans to help first-time buyers.  It’s possible that the federal government has discussed this internally, and planned to make it part of their platform for the next election, and it’s also possible that Mr. Morneau simply answered off the cuff, and made a promise on the spot, as politicians are so inclined to do.

Either way, this was the first shot across the bow in an election campaign where many, including myself on multiple occasions, have suggested that all three major political parties will make affordable housing part of their platforms.

Mr. Morneau went on to say that the government has focused on three major issues related to housing since 2015:
1) Shortage of affordable housing nationwide
2) Rapid appreciation in certain markets (assuming this is Toronto and Vancouver)
3) Affordability for millennials

Personally, I haven’t seen much action from this government on those three collective fronts.

The government did promise/pledge to increase affordable housing……over the next ten years.

And they did enact nationwide policies aimed at restricting borrowing.  But that didn’t do anything to stop appreciation in Toronto and Vancouver, but rather did so across the entire country.  I can’t imagine they’re touting a success at curbing appreciation in two cities, when they implemented policies across the board, can they?

Well, apparently they can!

Later in the interview, Mr. Morneau later specifically pointed to the mortgage stress test as “cooling the hottest markets,” which I find to be utterly bizarre.  When you restrict the ability of somebody to borrow in Toronto, you do so too in Ottawa, Regina, Kamloops, and Yellowknife.  The markets cooling in Toronto and Vancouver were a by-product of federal policy, and not city-specific.

My favourite part of this speech and question-and-answer period was when Mr. Morneau was asked to elaborate on potential policies and regulation changes to help millennials, and he offered absolutely nothing.

This leads me to believe (gasp!) that he doesn’t actually know how the government can help millennials, but rather he opened his mouth when given the opportunity to do so, and made a promise that he has no idea how to keep.  That is politics!

Many people out there, myself included, laughed when we saw the headline that the Mr. Morneau and the Liberals want to make housing more affordable for millennials, considering that it was their policies that made it more unaffordable in the first place.

A good politician can duck, dodge, and spin anything.  I’m sure the Liberals could argue that they were successful in cooling the markets in Vancouver and Toronto, and that now, and only now, are they prepared to enact Phase II of their grand-master-plan to help millennials into the market.

Look, I’m not faulting just the Liberal government here.  I believe that any government would do this, be it Liberal, Conservative, NDP, or…..Green.

I’m sure that 30-40% of the people reading this blog post are Liberal voters, and I’m not aiming to hate on your party, or your candidate, but I am hating on the politics at work.  It’s absolutely absurd, no matter which political party is in power.

Last week, the Mortgage Professionals of Canada (MPC) released a report that concluded the “rigorous” mortgage stress test implemented last year is denying the opportunity of home ownership to the young and middle class.

You can read the entire report HERE.

The report is phenomenal, all 84 pages of it.  In the words of Jerry Seinfeld, “I almost read the whole thing!”

This report is released every year, and the 2017 report traced back every major policy change during the past decade, numbering seven in total.

The summary of their findings, one year later:

The policy changes were not equal in their impacts. Out of the first six sets of changes, only one had substantial and long-lasting effects – the elimination of mortgage insurance that took effect in July 2012.

We concluded that the seventh change – which, at the time was soon to take effect – would also have substantial and long-lasting effects: When the OSFI-mandated mortgage stress test, which took effect in January 2018, is added to the stress test for insured mortgages that took effect during the fall of 2016, there would be substantial depressing effects on housing activity.

The fall 2017 report estimated that as a result of the stress tests, resale activity in 2018 would be in the range of 470,000, which would be 13% lower than in 2016 and 7-8% lower
than in 2017 (at the time we didn’t have final sales numbers for 2017 so couldn’t calculate the change precisely).

In actuality, sales fell even more than expected in 2018, to about 458,400, a drop of 11% compared to 2017 and 15% compared to 2016. (The larger than expected reduction may be due to the interest rate increases that occurred during the year. Most of the reduction in sales during 2018 was due to the mortgage stress tests.)

We also commented that “By the time of the next federal election in October 2019, about 200,000 Canadian families will have encountered sharp personal disappointment as the
direct result of this pair of policies (they will either have significantly reduced their housing expectations in order to obtain financing, or been entirely prevented from buying a home).”

In various places, including pages 26 to 27 of the fall 2017 report, this author has commented that the stress tests use “the wrong interest rate”. It is reasonable to test borrowers’ capacities to afford higher future interest rates. It is not unreasonable to assume that in five years, the interest rate could be as much as 2 percentage points higher. But, it would also be prudent to assume that the borrowers’ incomes will be higher, because we have a long history in Canada of average wages rising by about 2% per year. The borrowers will have more ability to pay at the future renewal. This is not taken into consideration. It will also be a fact that there will have been a substantial amount of principal repayment (typically 13% to 14% during the first five years) through regular required payments (and even more if the borrower makes any voluntary additional payments). The higher interest rate will be applied to a reduced principal amount, and therefore the stress tests over-estimate how much the payment would increase. If both of these factors are taken into account, a 2-percentage point increase for the mortgage interest rate, occurring five years in the future, can be simulated today using an interest rate that is 0.75 points higher than the initial contracted interest rate.

It’s that last point that is the most important, since it’s what just about every critic has to say about the mortgage stress test.

In fact, after Bill Morneau made his comments last week about “helping millennials buy houses,” articles started pouring out of every media outlet.

Haider & Moranis, who seem to comment on every hot real estate topic, and are on the ball 97% of the time, wrote this article on Thursday:

“Why The Government Should Rethink The Morgage Stress Test”

They quoted the very same report that I referenced above, even quoting large sections of it!

They make the same point that is made in the last paragraph above; that the 2% stress test doesn’t take borrowers’ higher incomes into consideration.

Not surprisingly, just about every comment on the article was filled with vitriol, directed at the authors, real estate agents, people who borrow money, and the like.

Another article published last week, this one by the Toronto Star, is worth reading:

“Liberals Have Options To Help Millennials Buy Homes; Would Be A Vote Winner Too”

The reason this article bothers me should be obvious; it’s in the title.

Mr. Morneau’s comments, and any further action taken by the Liberal government, is merely a “vote-winner.”  It’s obvious, and the people who it might affect will know this, but are expected to reward the Liberals anyways.

This, I don’t understand.

If you walk up to somebody and punch them in the face, then the day after, walk up to them and not punch them in the face, should they thank you for not punching them in the face?

Because that’s basically what’s happening here.

The policies that the Liberal government established helped, more than anything, to make home-buying unaffordable for younger buyers.  Now, with an election on the horizon, they’re going to try to undo what they’ve done, and articles like the one above by a Toronto Star writer suggest that voters will fall right into the trap.

I can’t believe this is going to work.  Except that, I sort of can.

Now on another, and perhaps less repetitive note, I’d like to offer some ways in which the government, current Liberal, or future other, might be able to help millennials.

1) Increase the maximum RRSP withdrawal amount

Currently, first-time home-buyers can withdraw up to $25,000 from their RRSP’s to purchase a home, and have 15 years to repay the amount.

This is probably the #2 in the arsenal of today’s young buyers, after the obvious #1: get money from parents.

Some might argue that the $25,000 cap is arbitrary, and others might suggest that we need to have a cap to protect people from themselves, and their desires.  Others yet might argue that it’s not fair for any RRSP-holder to use their funds to purchase a home, and repay them later, as I have heard some opine in the past.

If the government truly wants to help millennials, and only millennials, then this should be a focus, and not the stress test.

2) Exempt first-time buyers from land transfer tax

You would think that the land transfer tax we pay here in Toronto is absurd beyond belief, but that’s until you read about what buyers pay in other countries around the world.  Recall my 2015 blog about stamp duty in London, England.  That’s right, it’s 12% on the value of homes $1,500,000 British Pounds and over.

I don’t like the land transfer tax, municipal or provincial, because it is a tax based on nothing.  Naively, I feel that taxes should somehow be traced back to public service, and since we have property taxes on our homes, I can’t see why the transfer of title should be taxable, since we already pay to transfer title, and we actually now pay $75 in order to pay our land transfer tax.  A tax on a tax.

If the federal government wanted to, they could offer money to the municipality, or province, to make up for an exemption for first-time buyers.

But that, of course, is asinine thinking, since the federal government rarely works with municipalities or provinces effectively (many of you will debate this, but this is my humble opinion), and usually scoffs at the idea of any “repayment.”

I’m just throwing it out there, you know, before we get to some even dumber ideas…

3) Start lending millennials money

Why not, right?

Many of these same kids took out OSAP loans to get through university (although didn’t Kathleen Wynne wipe out a whole whack of loans in order to win votes?), so why not start lending them money to buy houses?

Then, planned or otherwise, the government can simply “forgive” the loans in 15-20 years, after carrying them on their books for decades, and potentially use some creative accounting to hide the losses, as just about every government, from every political party, likes to do.

4) Let millennials deduct mortgage interest from their income taxes

Hey, they do it in the United States, right?

Except they pay taxes on the capital gain of a primary residence.  And we don’t.  The largest tax exemption you can possibly think of, and we take it for granted.  But that’s a topic for another day…

Governments don’t fill their bank account by letting people pay less tax, so surely we can all recognize that if this did happen (which it won’t because I’m making up stupid ideas to prove a point), the government would tax other people in other areas to fill in the void.

5) Modify the mortgage stress test.

Ah, finally a logical suggestion!

Of course, this would help everybody equally, and not just millennials, but isn’t that fair?  Yes, no?

Multiple people in the mortgage industry have told me that we could see the stress test reduced from 2% to 0.75% later this year, and while I don’t really have a horse in this race, I’ll throw my vote in the “yay” column.

One final thought, just because nobody has mentioned it.

If the government were to truly “help” millennials who want to buy homes, where does this leave all the millennials who rent?

How long until the renters, watching the buyers make hay, start to complain to their local politician that making things more “fair” for millennials only made things fair for some millennials, and not others?

Oh the horror!  And the IRONY!  It makes me laugh!

Because then, we’ll start talking about subsidies for millennial renters, especially if, you know, there’s an election happening.

This is not the last we’ve heard on this topic; on any of these topics!

I welcome your thoughts…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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  1. Verbal Kint

    at 6:49 am

    “Except they pay taxes on the capital gain of a primary residence.”

    Except they don’t. Plenty of time to fact check with 416 sales 20% below last year’s already low numbers,

    1. Appraiser

      at 8:41 am

      “Section 121[51] lets an individual exclude from gross income up to $250,000 ($500,000 for a married couple filing jointly) of gains on the sale of real property if the owner owned and used it as primary residence for two of the five years before the date of sale.”


      1. Trish

        at 8:55 am

        So Americans do pay *some* capital gains tax on the sale of a primary residence. And Canadians pay zero.

        So maybe you’re both right?

        1. J

          at 10:12 am

          The median US home price is $223,900 according to Zillow. So in most cases capital gains tax is $0.

          1. Trish

            at 10:44 am

            Well now you have me Googling this! Lol

            The $250,000 number is the capital gain, not the sale price of the home.

          2. omar

            at 1:45 pm

            You also get to deduct fee’s against it.

            So when selling you can add up your transaction costs, realtor costs, and any upgrade you did to the home, from paining to a new kitchen.

        2. Not Harold

          at 12:48 pm

          People who pay capital gains taxes on their houses used to be able to take a deduction for their mortgage interest. Very few people who didn’t pay capital gains were able to take the mortgage deduction.

          In the US you have the option of taking either the standard deduction or itemizing. There were also minimum percentages of income before certain categories of expenses could be deducted.

          In Canada you get the standard deduction and then can deduct everything else.

          So at recent low rates you needed to be buying a lot of house before your interest was more than the standard deductions. Most of the places where houses cost enough to be worth taking the mortgage deduction also saw lots of price appreciation and that capital gain allowance got used up quickly. Mortgage deduction was more widely available when rates were 10%+. At 3.5% and the new Married filing jointly deduction of $24k, you need a mortgage of at least $685k before it makes sense to itemize, ignoring other deductions (many deductions for people who are employees were also eliminated, and the state and local deduction was capped at $10k).

          Previously loans of up to $1MM were deductible, now the limit is $750k for loans originated from 2018 forward. So there’s a very narrow band of houses where interest is deductible and it would take a large increase in value for capital gains to be owed.

  2. Real estate millennial

    at 9:41 am

    Governments pander to the largest voting cohert all the time so that’s nothing new. This seemed like a blog on killing millennials which all panders to any audience outside of millennials. In every generation we have great people and some not so great (Donald trump is old but I would argue not very wise – not a millennial). We complain about millennials but don’t blame the teacher for poor teaching. We’re the children of baby boomers our teachers, so how well have they done if all they do is complain about the people they taught. I love this blog but you’re now out of touch David you do really well for yourself (not being condescending) 60+ transactions at over $10,000 per transaction puts you in the one percent so you see the world from that lens even though it probably wasn’t always like that. your clients are not the majority of people. I appraise real estate daily for both banks and private lenders and see how the majority of people live, I see their LTV’s on private funding which dominates my daily work now. There are far more irresponsible Canadians than you think. I value over 60 properties a month and, over a quarter billion last year. Peoples homes have become atms and lottery tickets and we’re protecting the fractional reserve system which is all of society’s money not just the “bank”. I don’t think we should help millennials out specificially because it sets the wrong precedent. I also don’t think we need to change the rules as they are right now either. I would simply allow for longer amortization periods based on age. You can give a 30 or 40 year amortization to someone in their 20’s and 30’s and that wouldn’t be an irresponsible bet that they live long enough to service the debt. Insurance companies do it everyday premiums based on age so amortization based on age isn’t far fetched.

    1. David Fleming

      at 9:57 am

      @ Real Estate Millennial

      Perhaps you misunderstood. I’m not blaming millennials for anything, and I agree that it’s the parents and teachers of millennials that should be looking in the mirror at any and every opportunity, just as my parents wondered how they went wrong when I wanted to play Tetris on my Gameboy instead of getting out of the Toyota Previa to gaze upon the Grand Canyon.

      My issue is with the politics here, not the millennials.

      As you noted, millennials make up the majority of my client base. I don’t think they’re reading this and cursing my name as they gain offense to a joke about Instagram. Millennials are incredibly self-aware, and would be the first to take a jab at themselves for their habits, interests, and yes, Instagram addiction.

      My “suggested” solutions were not ideas I would like to see implemented, but rather ideas I think a pandering government might eventually discuss.

      Millennials didn’t ask for the government’s help; the government offered it, in an election year. That’s the story here.

      Thanks for your contribution, as always.

      1. HVAC Mike

        at 7:27 am

        You see this article David?
        The Stock Market vs. Toronto Real Estate
        Over last 25 years

        Little bias as I see “Some people invest in stocks where you can get a dividend which I did not include in this analysis” and I assume most long term investments are in dividend form.

        1. David Fleming

          at 10:30 am

          @ HVAC Mike

          I’m impressed – this is a great data dive! I’ve never heard of this guy or the blog, but I’m going to bookmark it. Really, really impressed.

          I think what most people forget about the stock market vs. real estate market is leverage. While you can get a margin account, most people don’t. Most people who invest $100,000 in the stock market are calculating their return on that. If you put $100,000 in the housing market, you’re probably buying a $500,000 property. So right off the hop, your return is 5X higher. The gain on a primary residence is also tax free.

          Anybody who is good with numbers can make a compelling argument in favour of either equities or real estate, but I don’t think there’s any question that real estate as a primary residence trumps any possible equities investment out there.

  3. Appraiser

    at 9:59 am

    UBC professor Paul Kershaw says there’s no silver bullet to making housing more affordable for young Canadians.

    “What we need to do is modernize outdated policies that make the regular housing market inefficient (by limiting supply through zoning that privileges limited density; and by exacerbating demand by sheltering housing from taxation in ways that most other assets are never sheltered); as well as scale up the permanently affordable supply of housing,

    This may be heresy, but I would be in favour of a tax on the gains from primary residences, similar to the U.S. Perhaps not identical.

    The U.S. system seems to incentivize multiple property ownership through relaxed occupancy rules. You only have to live “part” of any 2 years of the past 5 in any property to declare it a primary residence. Admittedly, this perhaps affects a smallish, rather well-off segment of the population.

    Of course many homeowners with tons of equity will / should invest in other assets before they “sell the farm” in order to to eat up some of that equity, to lessen any tax hit.

    Which may be a good thing for the economy.

  4. Paully

    at 10:02 am

    If the Government were serious about making real estate more affordable, they would shutter the CMHC. Demand would instantly drop and prices would have to fall, making real estate more affordable for all, not just Mills.

    It is fascinating how a program like CMHC insurance has morphed over time into something that actually makes housing less affordable by distorting demand beyond natural market levels.

    1. Mike

      at 12:34 pm

      I love this idea.

  5. The PICKLE

    at 10:03 am

    How about reducing realtor commissions? With the increase in housing prices people are paying 4-5% (40-50k) of say a 1MM house/condo + land transfer + closing etc. Do realtors really need to be paid 20-25k per end (I know there is a split with the brokerage) to broker the transaction?

    1. Free Market

      at 10:15 am

      OMG. What a stupid idea. And I say this as somebody that would of course love to pay less to sell my home.

      But are you really calling on the government to step into the private sector and mandate fees for a service?

      All oil changes should now be $8.
      Math tutoring should be $15 per hour.
      So-called “high price” lawyers should not be permitted to charge high prices.
      Baseball players don’t NEED to be paid $30mm per year. Government shut that downnnn!!

      I would hate to see this post evolve into a discussion about government interference in a free market.

      1. Reynolds

        at 6:48 pm

        The government in Ontario does regulate the fee structure for doctors. The fees paid to physicians are derived from the Ministry of Health not the Ontario Medical association. Billing outside of the OHIP rates was banned in 1985 if I remember correctly.

  6. Kyle

    at 10:14 am

    If they want to make things more affordable for millenials, they could tinker with the $1,000,000 CMHC limit. This particular hurdle affects millenials disproportionately. Even millenial Doctors, Lawyers and Investment Bankers making fabulous incomes will have trouble buying anything much over $1M, because they simply haven’t had that much time to build up equity. And so they end up competing in the sub $1M market, further driving up the “affordable bracket”

    1. Long Time Realtor

      at 10:28 am

      Clearly the stress test has killed transactions, (but not prices, yet) – thus the demand side of the equation has been installed and is working. How about supply?

      Build Baby Build ! (rentals and freehold), is your only answer to “affordability”.

      1. Kyle

        at 10:46 am

        I’m all for freeing up more supply in the large cities, but i consider that to be Provincial and mostly Municipal mandate.

        If the City of Toronto, loosened up the yellow belt and removed all the delays, the housing crisis would be solved in under 5 years.

        1. Not Harold

          at 12:52 pm

          Design reviews, art fees, affordable housing fees, LTT, permitting hell, and mandatory appeals.

          OMB should be reconstituted and be given control of all zoning, heritage, and permits across the province.

          Current structures enable corruption and NIMBYs, even when it’s entirely futile – hello Yonge and Eglinton!

  7. Mike

    at 12:30 pm

    Fixing the stress test doesn’t solve the crux of the problem. How is it financially prudent to give someone a mortgage at 5x-6x their income?

    If that is what it takes to buy property in TO or Vancouver the market itself is broken, not the stress test.

    1. Libertarian

      at 2:46 pm

      I agree with you 100% percent and the comments above about CMHC.

      The bottom line, especially here on a real estate blog, is that there are A LOT of people in this country who want to be able to buy as much real estate as they can as often as they can. Anything the gov’t does to harm that is considered “evil”, especially when there are A LOT of businesses willing to loan those people the money.

      That’s why I have no problem with OSFI putting the handcuffs on all these financial institutions.

      On a higher level, this all comes down to: What is the role of government? As we approach the year 2020, should we still be governing ourselves as if it’s 1920? Do we still need 3 levels of gov’t? Can we not privatize some of the more mundane functions of gov’t? It’s been interesting to see the federal shutdown in the US. The world didn’t end. Life went on. Just goes to show you that the gov’t isn’t as important as it makes itself out to be.

  8. DT

    at 1:06 pm

    I find the critique of the stress test ludicrous. People who have borrowed to the max under the current low interest rate environment will be under significant stress when interest rates eventually rise. That is, the value of the mortgage can easily end up being worth more than the sale price of the house. The point of the test is to try to build in a buffer to prevent that from happening. It’s hard to predict exactly when and by how much interest rates will rise, but it’s a certainty that these rates won’t last forever. The test helps prevent catastrophe.

    As for mortgage interest tax deduction, it would be a massive transfer from lower income people (who are more often renting, therefore wouldn’t realize the benefit) to middle & high income people. It’s bad tax policy that doesn’t help those who need the most help.

    In general, I think we should avoid subsidizing one form of housing over another. More effective to ensure those with the greatest need have income support and help with upgrading skills / getting jobs, and let them decide how best to spend their money.

  9. Appraiser

    at 4:05 pm

    TREB Q4 rental data is out.

    Transactions up 7%.

    I bedroom rents up 8%

    2 bedroom rents up 6%

    3 bedroom rents up 8%

  10. Housing Bear

    at 4:25 pm

    If CMHC went away the impact would be far more negative for financing conditions and prices than the addition of the stress test to the current environment. If banks and lenders were actually on the hook for their loans, rates would be higher, and far less people would qualify. Either government should stay out of financing all together, or they better have safeguards to protect the tax payer.

    In regards to capping the stress test, mortgage rates can go up even if BOC stops raising or cuts its rate. Mortgage rates could be more than 200 bps higher five years from now. 2% AVERAGE annual wage increase is inflation. A lot of that gain is eaten up by everything else you buy going up by an average of 2% as well. Wages sometimes can go up by 3-4% annually over the short term! There are also short term periods where wages fall for a few consecutive years……….. But I try not to offend anyone the R – word on this site.

    In regards to politics, you would think that by now millennials would have figured out the pitfalls of government guaranteed loans (Student loans anyone?), but sadly not. Maybe governments “subsidizing” them to become first time bagholders will do the trick. Hey, at least this time we can declare bankruptcy!

  11. Christopher

    at 4:27 pm

    I don’t view the stress test as making making it more difficult for millennials to buy a home, or at least being a negative thing in the long-term. Sure, if you previously qualified to borrow 500K, now you can only borrow 400k. Does this stop you from buying that starter condo or moving up to a more expensive property? No. It just stops you from maxing out your budget and forces you to buy a lower priced property.

    The unknown factor in this whole qualifying people at 2% higher rates business is what impact did this have on prices? What if the stress test lowered the price of the starter home by 5% and that home increases in value 5% in the future when the stress test is removed. The millennial buyer theoretically just gained 20-40k in equity. Is it better to buy a 500K home that appreciates 5% to 525K or a 600k home that does not appreciate in value?

    While people have been denied the opportunity to borrow the extra money to check off more boxes on their “want” list, they also benefit from the reduced amount of money in the market buying real estate and the negative impact that has on prices.

    The only losers in this are people who trying to sell their property with the stress test in effect.

    1. Clifford

      at 7:45 am

      I’m not sure if those millennials want a starter condo. It seems many want to skip that step and go right into a house.

      I think that’s the problem. We have 25 year olds who want to get into a detached home NOW rather than work their way to it. Libs are buying votes by pandering to millenials. But it will turn out badly for them just as it turned out badly for Wynne.

      1. Christopher

        at 7:07 pm

        To Realisticslly afford that you need 200k downpayment and a combined family income of 200k per year. That’s essentially nobody in their early to mid twenties and very few (10%?) in their thirties

        1. Kyle

          at 10:15 pm

          Here’s the challenge, coming from a millennial in his 30s making over 120k currently (excellent income compared to most). I still struggle with the debts of my past. I dont blame anyone for my decisions but we all understand that millennials just got played well on debts. Right now market drives my buying point and the market is still relatively high. I can’t find much around $350k that isn’t a condo in GTA. I consider $350 to be affordable and being a reaponsible adult. My parents 30 years ago got a semi detached house for half that cost. Now for 2-3 times the price of a condo I’m force to buy something denser in population. I have to share the walls in a town home at $500k, and then get charged monthly “condo ” fees on top of that. Say what you want but the equal opportunity to buy a home for millennials has not been the same as those before us.

          Now putting that aside, and without knowing any of the answers to these problems, i believe the problem needs to look at improving the future for all upcoming generations, not just millennials. Part of this problem is greed and expectation that your real estate investment should net you back 2-3x what you paid for (in some cases more) over the long term. I think thats ludicrous, i certainly dont expect a $500k townhome today to be worth 1-1.5 mil 30 years from now. I dont even feel it’s worth the cost it is today. Until we fix that expectation, we will continue to go this path until the next generation physically cant buy our homes, and again who do you think will be screwed with homes that cost a lot but can’t be sold to anyone? Same group that got hit going into the market is destined to be hit going out.

          I dont believe I’m entitled to have a big house with land and all that my parents got, as much as i want that. But I’m in my 30s now and i dont think it’s unfair for me to want to live in a home vs a condo. I’ve had to delay getting married for years and delay getting a house and a family even longer, i think ived worked long enough to earn the right to an affordable home. These factors make me look at the market and say why must I pay more for less? How can we possibly believe that the average house sale that starts with a 4 or 5 on six figures is appropriate, that it equates to 4-5x my annual salary and that’s Ok?

          I just want to be able to strive for things in life that will allow me to live freely without the constant pressure of financial struggles everywhere I turn. Is that really so much to ask for? If I’m feeling this way making probably double the average salary, how do people who make far less feel?

          For the record, i pay more than my parents mortgage on debts currently replaying loans for me and my fiance (over 2k / month). My $120k doesn’t go as far as people think.

  12. steve

    at 5:04 pm

    Take a step back folks …. the market seems to be correcting all by itself. When people can no longer pay these high prices, well then, it’s obvious that sellers (if they are serious about selling) will lower asking prices.

    Let the market do its work of matching buyers & sellers, who all on their own will find the true value of a property.

    1. Andy

      at 10:04 pm

      To be fair though the Vancouver market is correcting as is much of Canada, but central Toronto continues to rise. No inventory out there. Prices are going nowhere but up if this continues into spring. Maybe the snow doesn’t help lol

    2. Clifford

      at 7:47 am

      On its own or a big push from the constant, debilitating rule changes? The rise was manipulated and so is the fall.

  13. Grimsky-Korsakov

    at 11:03 pm

    None of these solutions addresses what is needed by the government to do in Toronto: Build. More. Housing.

    Unlock the zoning in the yellow belt for missing middle housing.

    Remove parking minimums.

    Build subsidized housing across the whole city.

    Start a co-op program.

    1. Mxyzptlk

      at 11:58 pm

      Subsidized housing? Subsidized by whom? Oh, right, the government, of course. Except that everyone (okay, only 99% of everyone) wants lower taxes, hence no money to subsidize, hence no subsidized housing. Your other ideas have merit, though.

      1. Grimsky-Korsakov

        at 6:54 am

        Yes, Toronto is deeply undertaxed. Raise my taxes please to pay for things like more housing, more transit like the relief line, and state of good repair.

        1. Clifford

          at 7:49 am

          I’d be OK with this, but they will just squander the money. So until the government can pull their head out of their ass and figure out how to manage money and make better decisions, I don’t want them touching my taxes.

          1. Grimsky-Korsakov

            at 8:48 pm

            I’m sorry you have such a poor understanding of how governments work.

      2. Carl

        at 9:09 am

        @Mxyzptlk “everyone (okay, only 99% of everyone) wants lower taxes”?
        This claim is based on what? 99%? Really?

  14. FDP

    at 2:06 pm

    I wish the BOC wasn’t the end all be all… they have too much reign and no competition( as in the US). They decide NO more money for MORGAGES and that’s it…not interested in lending…..ok, so now what? Our government thinks they are our financial advisors, HA, look at how they spend, money is NOT they’re thing, pathetic, what a joke. Leave realestate (free market) up to those that want to invest and take the risk upon themselves, and government stay out of it. Bet they miss that land transfer tax this year!!

    1. Nerine Watson

      at 10:20 pm

      Ha ha ha liberals helping millennials OWN HOMES in their HOME COUNTRY 🙂 LIBERALS TAKE NOTE OF excellent ideas READ above WAKE UP don’t just think about yourself getting RE ELECTED with foreign HOME ownership WRONG why can’t young Canadians BE ENCOURAGED TO OWN homes in their OWN COUNTRY and in TORONTO CANADA so 🙁 sad to take away this privilege not to encourage young millennials to become land lords in home country

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Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

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