The federal government is reexamining down payment requirements for investment property buyers in Canada as part of a plan to make housing more affordable.
In his recent mandate letter to Ahmed Hussen, minister of housing and diversity and inclusion, Prime Minister Justin Trudeau requested the review of down payment requirements on investment properties as one step in creating a Fairness in Real Estate Action Plan.
The federal government’s Canada Mortgage and Housing Corporation (CMHC) confirmed in a statement to Daily Hive on Thursday that speculative investments — typically risky investments with the expectation of a significant gain — have become a point of concern in Canadian real estate.
“Everyone in Canada deserves a place to call home, and we recognize that the dream of homeownership has become out of reach for far too many Canadians,” CMHC’s statement reads. “We have heard loud and clear from Canadians, non-profits, advocacy groups and industry leaders alike that speculative investing in residential real estate is an important concern. It contributes to overheating in the housing market and pushes home prices higher.”
With real estate prices skyrocketing across the country and many aspiring homeowners being outbid by stiff competition, the dream of homeownership has become less attainable for many Canadians.
“Canadians have also told us that they are at times bidding too aggressively on housing because they fear missing out on purported price gains and therefore borrowing beyond what they can afford,” CMHC said. “The issue of having an investor buy a property purely to speculate on price increases often leads to that housing unit being taken off the market for a family to live in.”
CMHC did provide details on what the review would entail or what alternative down payment requirements would be considered. Currently, buyers are required to pay 20% down on non-owner-occupied properties.
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The down payment requirement review is one of several steps the Prime Minister has mandated, including an anti-flipping tax on residential properties held for less than 12 months, a temporary ban on foreign buyers of non-recreational residential property, and preventing renovictions.
“By developing policies to curb excessive profits in investment properties, protecting small independent landlords and Canadian families, and reviewing the down payment requirements for investment properties, we are targeting the issues the market is facing from multiple angles,” CMHC said.
“We realize there is lots of hard work ahead, but are committed to working with all our partners and all levels of government to make sure that everyone in Canada has access to safe, secure, and affordable housing. Canadians expect no less.