You must have heard the news regarding Justin Trudeau’s new upcoming program that offers incentives to first-home buyers. Here are our thoughts and analysis on the topic. Tell us what you think!
The new policy initiated would mean that the most expensive homes Canadians would be able to buy through this program would be worth around $500,000 ($480,000 max in insured mortgage and incentive, plus the down payment amount).
Most people would think: this makes the demand for one-bedroom and bachelor condominium suites skyrocket for sure. However, based on the current cost of land and material cost, it is nearly impossible for a builder to develop a condominium worth 500K unless the following takes place:
1. Cutting corners
Builders may resort to taking short cuts developing their upcoming projects, but this is highly unlikely either since it would mean that their reputation is at stake.
2. Recommendations from Government on building “nano units”?
And yet, this is another highly unlikely possibility since the long term plan for the government is to build both high schools and elementary schools in Downtown Toronto.
So what does this mean? The only other possible outcome is that the this initiative aims to draw residents away from Downtown Toronto, into the suburbs where property prices are still relatively low and affordable. But wait — isn’t this 10% incentive for new home-buyers only? If you purchase a home that’s already built, that drops your incentive to 5%, which would mean you’re not fully utilising this incentive and is therefore not worth it.
In that case, this doesn’t seem very helpful to first-time home buyers then. Why? This is simply because the resale market for one bedroom units are already in the seller’s markets.
But with further evaluation, I see why this initiative could be good for first-time home buyers. The government might be narrowing their target to the millennial generation. By drawing the youth of Toronto into the suburbs, it would make sense since the prices of real estate in Vaughan and Markham are still relatively low.