BMO Pours Cold Water on Canada's Budget Housing Measures, Sees Relief in Immigration Slowdown

BMO Pours Cold Water on Canada's Budget Housing Measures, Sees Relief in Immigration Slowdown
April 18, 2024

While the Canadian government's recent budget allotted billions towards housing initiatives, BMO isn't expecting a tidal wave of positive change. The bank believes the measures will have a limited impact on affordability due to their focus on stimulating demand in an already overheated market.

BMO: Budget Measures Stoke Demand, Don't Fix Affordability

BMO Chief Economist Douglas Porter dissected the budget's housing measures, finding many cater to first-time buyers but ultimately inflate demand. Examples include:

  • 30-Year Amortizations: This lets first-timers stretch their budgets on new builds, potentially preventing price drops but doing little for long-term affordability.
  • Increased RRSP Borrowing Limit: This allows for larger down payments, again boosting demand without tackling the core issue.

Immigration Slowdown Seen as the Game Changer

BMO predicts the government's planned immigration slowdown will have a more significant impact on affordability. Lower population growth is expected to alleviate demand pressures on the housing market. This aligns with BMO's previous stance that Canada's housing issues stem from excessive demand, not a lack of supply.

Additional BMO Insights

  • Capital Gains Tax Change: The inclusion rate for capital gains on investment properties will increase, potentially impacting investors selling with a low cost basis.
  • Uncertainties Remain: The proposed standardized low-rise catalog and ban on corporate ownership of single-family homes lack clarity on implementation.

The Road Ahead for Canadian Housing

While the full impact of the budget and immigration changes remains to be seen, BMO suggests a potential cooling of the sizzling Canadian housing market. Reduced foreign investment and a more cautious domestic investment climate could lead to a more balanced market.

Looking to Navigate the Changing Market?

The real estate market is constantly evolving. If you're considering buying or selling a home, contact Coldwell Banker Horizon Realty. Our experienced agents can guide you through these changes and help you achieve your real estate goals.

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