The Quebec Federation of Real Estate Boards (QFREB) says fewer people are using the Home Buyers’ Plan (HBP) in the province to help purchase a home and is calling for immediate changes to the program.
Statistics from Canada Revenue Agency show from 2002 to 2015, the number of HBP withdrawals declined almost continuously from 38,880 to 26,910 withdrawals, says the federation.
“It is normal for there to be fewer HBP withdrawals during periods when fewer properties are being sold,” says Paul Cardinal, market analysis manager at the QFREB. “However, this is not what happened. While the number of HBP withdrawals fell by 31 per cent from 2002 to 2015, the number of Centris sales increased by nine per cent. Thus, the decline in popularity of the HBP was not due to a decrease in residential sales.”
The federation says the HBP “enabled nearly half a million Quebec households to become homeowners” and “remains an excellent program due to the tax benefits it provides to first-time buyers.” But it says the purchasing power of first-time buyers is crumbling.
“One of the most likely hypotheses for explaining the drop in HBP use is that first-time buyers did not manage to contribute to their RRSP at the same pace as property prices increased,” says Cardinal. “One thing is sure – salary increases have not kept up with property price increases. This would partly explain the drop in the volume of withdrawals during the period of 2002 to 2015.”
The inflation of property prices in recent years has also resulted in a significant loss of purchasing power for first-time buyers, says the QFREB. A dollar withdrawn from an RRSP as part of the HBP in 2002 was worth only 48 cents in 2015. If the average HBP withdrawal amount followed the same pattern as the increase in property prices, it would have more than doubled during the same period, it says.
However, the increase in the average withdrawal amount from 2002 to 2015 was only 23 per cent, as it went from $11,431 to $14,077. “It is clear that this increase is quite small when compared to the 108-per-cent increase in the average property price,” says the federation.
QFREB says modernizing the HBP or implementing new measures to further stimulate homeownership are required, particularly since Quebec has the lowest homeownership rate in the country (61.2 per cent compared to more than 70 per cent in the rest of Canada).
QFREB says it recommends broadening the scope of the HBP by allowing – under certain conditions – people who have already benefited from the HBP to re-apply in the event of a spouse’s death, a separation, a work-related relocation or the decision to accommodate an elderly family member.
QFREB and CREA want the federal government to increase the maximum HBP withdrawal amount to $35,000 per person, which would better reflect current real estate prices. The maximum HBP withdrawal amount of $25,000 has not been revised since 2009.
The federation also recommends that the HBP be used in an intergenerational manner by allowing parents to withdraw money that has accumulated in their respective RRSPs and transfer it to their children so they can buy their first home.