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GUEST OPINION: Protecting land for Islanders
The new federal measures announced for first-time home buyers will probably not have a drastic effect on the P.E.I. market, says an Island mortgage broker.
Kim Reddin, owner and mortgage broker with CENTUM Mortgage Partners Inc., described the initiatives in Tuesday’s budget as good, including an increase in RRSP withdrawals for first-time home buyers and allowing those going through a separation or divorce to use those savings for a down-payment.
However, the new mortgage rules will not directly address P.E.I.’s core issue of a housing shortage.
“It will be good, but it won’t have a drastic effect on our P.E.I. market,” said Reddin while giving her initial reaction to the budget. “In P.E.I., really our housing situation is difficult in that there is no supply. These kinds of things are not going to help people get into a house when there is no house to get into.”
The federal government is increasing the amount Canadians are able to withdraw tax-free from their RRSP for a down payment from $25,000 to $35,000. The initiative is only available to households with income under $120,000, and mortgages can be no more than four times the household’s total income.
Because most first-time buyers are looking to purchase in the $250,000 to $300,000 range on P.E.I., for many the minimum five per cent down payment is $15,000 or lower.
“Most people aren’t taking out more of their RRSP, they’re taking out the minimum (down payment),” said Reddin. “That amount increase isn’t really going to help first-time buyers in P.E.I.”
Reddin said the better initiative for P.E.I. is that the RRSP down payment option will now be opened to people who are going through a separation or divorce.
In the past, individuals had to wait five years after a separation before they could qualify as a first-time home buyer. That meant RRSP withdrawals for a down payment would be taxed.
Because many individuals coming out of a separation do not have much saved up for a down payment, Reddin said the change will be a big help for some.
Overall, she said it was interesting to see how the federal government addressed the issue of housing in the budget while maintaining market stability.
“They’re trying to make some changes that won’t affect the housing market because it’s very fragile right now,” she said. “The rules that have changed over the last little while are probably good for the market until things stabilize.”
Housing was one of the major areas addressed in Tuesday’s budget, which also announced a measure that will see the federal government pick up part of the cost of mortgages to help lower monthly payments depending on a first-time buyer’s income.
Premier Wade MacLauchlan appeared optimistic with the housing initiatives, as well as measures to help grow a skilled workforce, and how they would together with existing provincial programs.
MacLauchlan said P.E.I.’s economic and job growth has left the province in need of workforce growth.
“This is coming at an excellent time for the kind of growth and opportunity that we’re seeing in P.E.I. when it comes to the workforce,” MacLauchlan told The Guardian, adding the province was committed to growing the housing supply and was expecting 2019 to be a record year.
“(These initiatives) come at a very good time in P.E.I. We are increasing the (housing) supply for it to be there with these programs to assist first-time home buyers.”