Charting the Course: Updated Incentives for First Time Homebuyers

I thought I’d share some recent news on First Time Buyers incentives, as there has been some significant change in the last weeks. These incentives were the topic of my last Newsletter, which you can find archived here.

First to the good news from the Provincial Government of BC, There have been major changes to the Property Transfer Tax Exemption rules for First Time Homebuyers.  This announcement was overshadowed somewhat by the new Anti Flipping regulations also announced. But since my clientele is mainly primary residence homeowners and especially first time buyers, this is on the whole a big win most of you.

BC is updating the first-time homebuyer landscape with its new property transfer tax exemption rules, effective for purchases closing April 2024 and beyond. Aimed at making homeownership more accessible, the updated policy exempts first-time buyers of homes valued up to $835,000 from the property transfer tax on the first $500,000 of the purchase price. This strategic move promises significant savings and a broader eligibility range, with a partial exemption extending to homes up to $860,000 It’s a game-changer for those looking to step onto the property ladder, especially to those in urban areas, nearly doubling the reach of previous support.

But while Premier Eby gave us this nugget, the Federal Program Administered by the CMHC to provide a Down Payment Loan has been taken away.

The Canadian Mortgage and Housing Corp. (CMHC) announced the closure of the First-Time Home Buyer Incentive (FTHBI) program, a key federal initiative aimed at assisting Canadians in purchasing their first home. Launched in 2019 with a $1.25-billion commitment, the program offered a new approach to homeownership: it provided interest-free loans to first-time homebuyers, which could be applied toward their down payment. This shared equity scheme was designed to lower monthly mortgage payments for new homeowners, making the goal of homeownership more attainable. While the program ran from 2019, the specific shared equity loan part of the program only lasted one year.

Despite its potential benefits, the FTHBI program is winding down, with the deadline for new or updated applications set for March 21. The discontinuation of the FTHBI program marks the end of an experiment in federal housing policy. While it aimed to address the challenges of homeownership for first-time buyers, the program’s complexity and the specific needs of the Canadian housing market have led policymakers to explore alternative measures to support prospective homeowners.

To be honest, the Feds could have looked at failure of a similar program from the BC Provincial that ran from 2017 to 2020 and was underutilized to see that their approach would be a tough sell. The program also essentially made buyers equity partners with CMHC for the loan amount, thereby losing some upside if they sell for a profit. In the end it was more smoke and mirrors than help for First Time Homebuyers and most of them forwent the program and just relied on insured mortgages without the optional loan.

So while one program has been cut, a more straightforward benefit to First Time Homebuyers will take effect in BC next month. On the whole this a big win for First Time Homebuyers who live in high-cost markets in BC.

Just for a quick example for a First Time Homebuyer buying a $800,000 property in BC. The Property Transfer Tax went from $14,000 to $6,000 or for a $600,000 property it went from $10,000 to $2,000. So to simplify, the full exemption brings a $8,000 savings if an owner occupied property over $500,000 is purchased.

If you have any question about this Benefit or would like me to run some more calculations, contact me here.