CMHC Fourth Quarter Report
Does 2015 CMHC Fourth Quarter Report support promises made by the Liberals?
Members of the media had full plates for the majority of October–Between the Federal election and Post-Season baseball, it’s been difficult to cover much else. Now, with Trudeau’s win and the Blue Jays’ loss, Canadian consumers can set their sights back on the health of our Economy–and the future of the Housing Sector.
This morning, the Canadian Mortgage and Housing Corporation released its Fourth Quarter report, which includes economic forecasts for 2016 and 2017. For those who recall promises made during the 78-day federal campaign, this report may offer some insight on what’s to come in 2016 and 2017. A highlight of the report focused on migration to Ontario, with the increase of new residents expected to outpace other parts of the country. Despite modest movement in recent years, Ontario’s economy is predicted to gain momentum in 2016 and 2017. Improving business conditions and expansion will increase hiring in the province, enabling job growth to rise to 1.6 per cent and 1.3 per cent in 2016 and 2017, as well as the unemployment rate to hover around 6.5 and 6.4 per cent respectively. This is one contributing factor to the appeal Ontario has to migrants, both nationally and internationally.
The CMHC quarterly report could not have been released at a more appropriate time. Following the federal election and Trudeau’s win, we can better gauge what type of action we’ll see in the housing sector. During their campaign, the Liberals focused on the best interests of the middle class; the high-tax battle, maximizing savings, and the accessibility of affordable housing. The high cost of housing in hubs such as Toronto and Vancouver has limited home ownership to those whose incomes far surpass the national average. In response to this issue, the Liberals propose new incentives for first-time homebuyers, including breaks on mortgage policies, as well increased amortization periods. To the discerning consumer, the promises sound more like suggestions, as nothing has been set in stone. Additionally, the Liberals propose to make changes to the Home Buyers’ Plan. Implemented in 1992, the Home Buyers’ Plan (HBP) allows Canadian residents to withdraw up to $25,000 from their RRSPs, tax-free to use toward the down payment of their first home. Participants of the HBP are given 15 years to replenish the amount withdrawn from their RRSPs. Although the withdraw limit isn’t expected to increase, the Liberal party proposes to make the HBP more accessible, by opening up eligibility beyond first-time homebuyers. Although interest rates are forecast to rise, the increase would be slight at worst, and are not expected to have a substantial impact on home buying.
Good news for Investors and Renters
Benefits that are also included in Trudeau’s plans surround the 10-year investment in social housing infrastructure, focusing on affordable housing and facilities dedicated to seniors. The investment will fund new buildings, as well as refurbish existing housing. As an investor, you will experience tax breaks and new capital investments will not be charged GST. This initiative is to encourage the construction of new affordable rental housing, as well as converting other multi-dwelling units and freehold homes into rentals.
It is predicted that high-rise unit ownership and rental demand will continue to be supported by first-time buyers with limited funds, as well an influx of Baby Boomers, who are looking for a maintenance-free lifestyle. Resale housing will remain vigorous over the course of the forecast, with numbers ranging between 193,000 and 225,000 units in 2016, before easing to the range of 175,000 to 220,000 units in 2017. Ontario home prices are predicted to grow, however, at a slower rate than previous years. This is due to a more balanced market, an increase in new listings, and the demand for more cost-effective housing options such as condominiums and townhomes. For Investors looking to expand their portfolios, this report, coupled with the results of the recent election should be kept in consideration when purchasing an income property. With several consumers turning toward more affordable housing options, new condominium and purpose-built rental segment are predicted to be solid investments.