Last week, Finance Minister Bill Morneau announced changes to the rules for government-backed mortgage insurance. Effective Feb. 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house priced above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.
What does this mean? For one, it means the federal government is targeting the Toronto and Vancouver housing markets, which have been on fire lately. In November, Toronto had already beaten its yearly record for sales. In Vancouver, sales were up 40 per cent over last year with prices increasing by 17.2 per cent. The fear is this kind of growth in Canada's largest urban centres is unsustainable.
The housing pressure on these two markets comes at an interesting time. Permanent immigrants have increased to 240,000 over the past year, while provincial migration has increased from commodity-producing regions that have fallen on hard times.
Although there will be impact felt here in Manitoba, it won't be as pronounced as in Toronto or Vancouver. For one, our average prices of both new and resale homes are well under $500,000. For the buyers of these homes, nothing changes.
In the case of those purchasing homes over $500,000, it is not fair to assume that if someone is buying a home at that price, they must have additional money. In some cases, a larger home is necessary to accommodate a larger family. This may be for the number of children living there or to care for parents who need to move in with their children for health reasons or where a care home is not an option.
The first-time home buyer in Manitoba will generally not be impacted by these changes; however, they definitely will be in Toronto and Vancouver, where average home prices are well in excess of the listed figure. All levels of government need to work with industry to remove barriers that negatively impact first-time buyers. During the implementation of the new rules, all efforts should be directed to assist the first-time buyer.
In the short term, the changes to the rules for government-backed mortgage insurance may actually stimulate the higher priced home market, as buyers who have been considering home purchases in excess of $500,000 decide to do so prior to the new rules commencing next year.
Mike Moore is president of the
Manitoba Home Builders' Association
