Are you aspiring to purchase a new home but find the path ahead steep and challenging? Rising house prices, interest rates, inflation, and factors like lumber and aluminum costs, as well as supply chain delays in new builds, may seem overwhelming. However, with the recent focus on housing in the Liberal budget, is there hope for relief?

It’s no secret that the current real estate market favors sellers due to a scarcity of available homes nationwide. To address this demand-supply gap, the government aims to double the number of new homes constructed in the next decade. The budget introduces various measures, with the centerpiece being the accelerator fund.

The initiative to address the housing supply shortage is warmly received by economists. However, it is crucial to recognize that immediate relief for homebuyers is improbable. The measures introduced will require gradual implementation over the coming years, as the accelerator fund is gradually rolled out. Moreover, experts urge caution in underestimating the magnitude of the problem, considering the construction industry’s existing hurdles, including labor shortages and supply chain disruptions.

Tax Breaks for First-Time Buyers
The demand for housing continues to grow, particularly among 25-35 year-olds who do not currently own a home. To support first-time buyers, the budget proposes a new tax-free savings account allowing individuals to save up to $40,000 specifically for purchasing a new home, resulting in a tax saving of approximately $1,500. This initiative is set to begin next year. Furthermore, the Liberal government plans to double the first-time home buyer tax credit to $10,000, applicable to home sales from January of the current year, leading to an additional $1,500 in tax savings. While these measures are generally well-received, experts caution that incentives boosting demand for new homes can also contribute to price increases.

Ban on Foreign Investment Buyers

The budget made headlines worldwide with its announcement of a two-year ban on foreign buyers in the Canadian housing market. However, it’s important to note that the ban includes exceptions for permanent residents, international students, and foreigners on work visas. There are also doubts about the ban’s overall impact due to two key factors. Firstly, it does not apply to foreign buyers purchasing recreational homes, which are considered a significant foreign market segment. Secondly, the influence of foreign investment on the housing market is being questioned.Surveys indicate that foreigners tend to purchase newer and more expensive homes, leaving uncertainty regarding their influence on the overall housing market.

Unveiling a Potential Solution
Paradoxically, one potential resolution to the predicament faced by new homebuyers lies within a major challenge they encounter—namely, inflation. As inflation prompts an increase in interest rates, mortgage rates follow suit. This alignment has led many, including esteemed economist Robert Hogue of RBC, to believe that these interest rate hikes may finally bring about a cooling effect on the housing market. While the new budget may provide some assistance, immediate results are unlikely. Nevertheless, there is growing speculation about the possibility of real estate prices experiencing a decline, which could represent a significant stride forward for first-time homebuyers.