Housing markets change under different circumstances. As such, many factors influence real estate trends. For example, immigration, inflation, interest rates, and government policy, to name a few.
A new government or leader can certainly change the housing market. Of course, because politicians have varying policies for homeownership.
Some advocate for better affordability and offer more rebates. Whereas others might introduce legislation that makes it harder to take out a mortgage. Similarly, Canada’s federal election may have an effect on Canadian housing costs. Continue reading below to learn more.
What is a Snap Election?
On August 15th, 2021, liberal Prime Minister Justin Trudeau called a snap election. He initiated the vote after asking permission from Governor General Mary Simon to dissolve parliament. The 2021 federal election will take place today, September 20, 2021. Of course, voters have been hitting the polling stations for early voting.
Usually, federal elections take place once every 4 years in Canada. However, a snap election is any election that takes place earlier than the usual date in October. Additionally, prime ministers in power can call a snap election if they wish. Note, there are a few reasons why prime ministers and political parties call snap elections.
With this in mind, some may want to secure a majority government if they only have a minority. This is hypothetically achieved by pursuing a strong initiative from the electorate. For instance, experts believe liberal leader Justin Trudeau aims to switch his minority government to a parliamentary majority government.
This would give his liberal party more power than other representatives during election 2021. They include Erin O’Toole’s Conservative Party of Canada, leader Annamie Paul’s Green Party, or Jagmeet Singh’s left-leaning new democrats.
Trudeau’s opposing party leaders find his hasty call for the Canadian federal election misguided. Particularly as the fourth wave of COVID-19 looms in Canada. Despite higher vaccination rates, the Delta Variant continues to push through. Some believe this warrants more attention from Trudeau than his election campaign.
Quick Housing Market Stats
Below are some quick facts on the Canadian housing market:
- The annual inflation rate is currently 4%
- Average mortgage interest rates are currently around 3.5%, with the best rates as low as 1.5%
- The average selling price of homes has increased by 26%
Housing Costs Now and Beyond the 2021 Federal Election
The COVID-19 pandemic triggered lower interest rates causing all-time lows. The international event encouraged people to pursue the housing market intensely. Lockdowns helped people save more money each month to put towards down payments.
Extra savings from staying home also made it easier for people to meet mortgage payments and homeownership costs. The average selling price for a Canadian home increased by a whopping 30%, or about $716,000.
As the housing demand skyrocketed, a seller’s market emerged. Multiple offers on listings brought thousands of housing prices over asking across the country. Once affordable small towns felt the effects too.
City dwellers drove up housing prices by purchasing houses left, right, and center. Because of remote work, many Canadians wanted to move to areas with more greenery and space.
To cool down the housing frenzy, the Canadian government intensified the stress test. Otherwise known as the minimum financial bar for house purchases. Prospective buyers must pass the stress test to qualify for a mortgage.
This was futile since the half-percentage increase for the stress test doesn’t really affect the majority of property buyers. They have the means to pass the new stress test. However, the changes to the stress test makes it difficult for lower-income individuals to afford housing.
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Trudeau’s Proposed Housing Policy
If Trudeau wins the election, here’s how he wants to approach housing:- Increase home supply by building or repairing 1.4 million new homes
- Double first-time home buyers tax credit to $10,000 and fund $1 billion in loans and grants for rent-to-own projects
- Introduce a Home Buyers’ Bill of Rights to criminalize blind bidding and make a home inspection mandatory
- Ban foreign homeownership for the next two years
Housing and economic experts told reporters that Trudeau’s increased government debt load will likely keep inflation, including housing prices, high. The Canadian Real Estate Association also criticized Trudeau’s plan. They claim it’s too restrictive and harsh on how Canadians sell their homes. In addition, this aspect of his platform won’t do anything to increase supply.
O’Toole’s Proposed Housing Policy
If Conservative leader O’Toole wins the election, be it a parliamentary majority or minority, here’s how he would approach housing:
- Release 15% of government real estate to increase housing supply, and build 1 million homes in the next three years
- Require federal funding for public transit to accompany municipalities investing in increased density
- Extend ability to defer capital gains tax to incentivize developers
- Limit the need for mortgage stress tests and encourage 7- to 10-year mortgages
- Ban foreign ownership for two years
O’Toole’s platform favors competition and affordability. It also targets inflation, including rising housing prices. His proposed release of government real estate assets is a great way to add more supply to the market without taking on more debt.
That paired with deferred capital gains taxes might increase supply and lower prices. Since developers will have more of an incentive to build new homes, including rental housing.
Final Thoughts
The Canadian housing market is climbing higher and higher with the current government. A snap election could impact housing prices. Each political party has different platforms for the housing issue.
In addition, the ongoing pandemic may impact the housing market further. Especially if there are more lockdowns or restrictions. Keep an eye on CBC News and other Canadian press channels for election results today.
