As Canadian home prices continue to climb, experts are warning potential buyers not to get too hopeful that promises from the re-elected Liberal government to help make homes more affordable will pay off.

Some of those promises may even have the opposite effect, said John Pasalis, president of Toronto-based Realosophy Realty.

“If they really go ahead with some of what they suggested, it will actually create more demand and drive prices even higher,” Pasalis predicted.

Real estate prices in Toronto are up 18.3 percent year-on-year, according to the Toronto Regional Real Estate Board. Meanwhile, the Greater Vancouver Real Estate Board said prices have risen 13.8 percent last September.

Across Canada, prices were up 13.3 percent compared to last August, according to the Canadian Real Estate Association.

The latest figures come after the three national parties tackled housing costs on platforms during the federal elections in September.

Promises made by the Liberal Party, which will form another minority government, include a two-year ban on some types of new property purchases by foreign owners, raising the limit on unsecured mortgages to $ 1.25 million and lowering costs of the loan. mortgage insurance by 25 percent. penny.

Pasalis said he was particularly concerned about the increased cut for uninsured mortgages, which would allow for smaller down payments on more expensive properties.

“Suddenly, you can buy a home for up to $ 1.2 million with a five percent down payment, whereas today you need a 20 percent down payment,” he said. “Policies like this do not help the market.”

Such initiatives offer greater access to capital, not affordability, he said.

“The more people that can borrow, the higher the prices.”

The liberal plan also promised to build 100,000 more homes for the middle class by 2024-25.

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But Andy Yan, director of the city program at Simon Fraser University, said the question of who will buy these homes needs to be looked at.

“The problem is not only the supply of buildings, but the supply for whom,” he said. “Those problems before the elections are still here.”

He said Statistics Canada data reveals that in Metro Vancouver, more than 10 percent of all types of property built after 2011 are owned by people who do not live in Canada. In the Richmond suburb, for example, Yan said, 17 percent of condos built after 2011 are owned by people who do not live in Canada.

Wages are part of the conversation that is being ignored, he said. With inflation related to the recovery from the pandemic, the purchasing power of many Canadians will erode as house prices continue to rise.

The federal government must begin any plans to help Canadians enter the market immediately, he said, as new homes take years to plan, approved and built, while construction costs continue to rise.

Yan also believes that the effect that house prices have on renters was not adequately addressed during the election campaign.

But Finance Minister Chrystia Freeland’s office insists measures put in place by Liberals during the election will address affordability.

In a statement, Freeland’s office said plans aimed at speeding up housing supply and stifling practices like blind bidding and home moves will help affordability.

The statement said expanding mortgage insurance and other measures will actually help affordability, but it did not address Pasalis’ concerns about price increases related to raising the limit for uninsured mortgages.

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Pasalis said electoral politics hampered the public’s ability to see beyond their own interests without considering the broader implications of some of the promised policies. He suggested that the politicians making the promises knew they could end up inflating home prices further.

“They realize this, but when you are a politician and you are fighting for re-election,” he said. “Let’s be honest, they are not always going to do what is necessarily best for the housing market, they are going to do what is politically popular.”

Any government is unlikely to take action to drive prices down, he said, out of concern that it could trigger a recession.

But restricting the availability of credit to investors is a measure the government could use to ease the market a bit, he added. Investors currently account for one in five home purchases in Canada, according to a Bank of Canada review in May.

“Many investors are increasing or decreasing in size and are choosing to keep their current home as an investment,” he said.

“One of the reasons we didn’t see a lot of new ads is that nobody wants to sell their house.”


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