Millennial home buyer? There might be little to gain from new budget promise

Bryanna Lafantaisie is looking to buy her first home in Winnipeg— but it's not going as well as she hoped.

"It's more challenging than I thought … finding a home within my price point that is structurally sound that I would even consider moving into," the 23-year-old said.

Like a lot of millennials in Canada, she's on a tight budget. With $200,000, she's finding many of the properties in Winnipeg are out of her price range.

The 2019 federal budget is aimed at potential first-time home buyers like Lafantaisie.

It includes a new incentive that could see Canada's housing agency contribute up to 10 per cent of the purchase price of a home — as a virtually interest-free loan — and bring down the mortgage load for borrowers.

The budget offers the program, known as the First Time Home Buyer Incentive, as a way to help with housing affordability. 

But the changes will do little to help young people wanting to buy their first home, according to one young real estate agent from Winnipeg.

"The biggest issue that a lot of millennials are having is the value of property. The property is increasing in value, and also the government was making slightly harder to qualify in the past," said Rahim Mirza.

"I think the bigger question for me is the stress test and the interest rate hikes," he said.

The Liberal government introduced stress tests in recent years to cool the hottest markets — such as Toronto and Vancouver — that have limited some people's ability to qualify for mortgages and reduced the size of new loans.

Mirza said those stress tests and interest rate hikes have made it hard for millennials even in Winnipeg to qualify even though it hasn't had the same price difficulties as some Canadian cities.

RRSP withdrawal increase 'Band-Aid solution'

To help with that initial downpayment, the budget also increased the amount a first-time home buyer can withdraw from an RRSP without penalty for the purchase of their first home.

The government will now allow someone to take up to $35,000 out of their RRSP to buy a home, up from the current level of $25,000 where it has been for the last decade.

"I think this definitely is a Band-Aid solution, to be honest with you," Mirza said. "It's better than what we previously had, but it's not the final solution," he said.

Mirza said a difference of $10,000 from an RRSP doesn't make a difference for a young person that doesn't have that much in their RRSP to begin with.

That's the case for Lafantaisie.

"I don't have that [amount of] RRSP saved up, so personally it wouldn't affect me," she said. "I can afford the monthly mortgage. I just need a way to get myself to that purchasing point."

"I am trying to find a way to up my budget without putting myself in a difficult situation," she said.

Lafantaisie said she'll keep looking and is hoping to find a way to up her budget so she can purchase a home.

"I feel like if I don't do it now, it's going to be next to impossible to do it later on. House prices are going up, I want to do this on my own without a partner, so I just want to do it before it's impossible."

Changes could be 'tipping point'

Winnipeg real estate agent Nicole Hacault said the changes could be enough to make a difference for some potential buyers.

"There can be that tipping point," she said.

"This could just bump you that little bit higher up, where you can get a better quality home, in a different neighbourhood that's more appealing to you, and makes you ready to buy now rather than having to save up and and wait for later." Hacault said.

It could also get young home buyers who might have been waiting to make a purchase now.

"When we saw the stress tests being introduced a couple of years ago, we saw their buying power being reduced quite a bit. And so it set them back on their goals. I've had buyers of my own who have waited two more years to save up to get into that area that they want to be in."

She said the incentives won't help you if you're already living in a market that is way out of your price range.

"In Winnipeg, that's absolutely going to help you, but in other markets, it isn't going to get you much."