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FTHBI - Alberta Markets Where It Will Be Most Effective

Written by Posted On Tuesday, 25 June 2019 10:06

The First Time Home Buyer’s Incentive, introduced in March when the federal Liberals unveiled their budget, contains new policy changes that have caused significant speculation among Canadians. This incentive marks the Canadian government’s involvement in shared equity mortgages, with the Crown Corporation housing agency announcing that it will contribute a percentage of the down payment for eligible first-time buyers. 

Going into effect this fall, the FTHBI will invest $1.25 billion over three years and provide loans of 5% to first-time buyers of resale homes, and up to 10% for newly built purchases. A perk of the loan is that it will be interest-free, paid back only when the home is sold or the mortgage matures. Further, the total amount owed will change based on the percentage of equity and market conditions. 

To qualify for this incentive, home buyers must qualify for an insured mortgage, have at least 5% down payment saved, obtain a combined household income of $120,000 or less, and purchase a home priced up to $505,000 (based on a 5% down payment).

Missing the Mark?

Many Canadians have criticized the FTHBI for its harsh restrictions. With average home prices approaching a million or more in Canada’s largest urban markets, critics say that the criteria is simply too low for the program to be utilized in the markets where buyers would need it most. 

Instead, many have suggested that rethinking that previously mandated mortgage stress test would be more helpful for home buyers. This test requires that borrowers qualify for a mortgage rate roughly 2% higher than the one that they’ll receive from their lender. This slows the buying process while also limiting what buyers are deemed capable of affording. 

Many Albertan Markets Qualify for FTHBI

Though the incentive is less fruitful in many urban markets, like Toronto and Vancouver, there are some Canadian markets, including cities within Alberta, where the incentive can be used by most since average home prices are lower. 

The study, which examined average home prices and median incomes across Alberta, discovered that the FTHBI could be used by the average home buyer in 20 of the 25 assessed municipalities. The report assumed that the buyer is purchasing a resale home priced at the city’s average, has a total income equal to or less than the city’s median, and has saved the required 5% down payment. Home prices were sourced from local real estate boards, while median income data was sourced from Statistics Canada. 

The study found that prospective home buyers in Alberta’s two most popular cities would qualify. A buyer looking for Calgary homes for sale could use the incentive given that the average home is priced at $472,741 and the median household income is $97,334. Additionally, someone looking at Edmonton MLS listings would also meet the criteria, with the average home priced at $372,224 and the median household income reaching $87,225. 

According to the study, the average first-time buyer would not qualify for the FTHBI if they were purchasing homes in the following areas:

  • Canmore
  • Average Home Price: $597,663
  • Median Household Income: $98,906

  • Chestermere
  • Average Home Price: $467,829
  • Median Household Income: $134,101

Beaumont

Average Home Price: $450,324

Median Household Income: $134,443

Sherwood Park

Average Home Price: $416,926

Median Household Income: $124,239

Fort McMurray

Average Home Price: $388,598

Median Household Income: $195,656

Sources Used

Average home prices for each region were sourced from the Canadian Real Estate Board, Central Alberta Realtors Association, Medicine Hat Real Estate Board, Lethbridge and District Association of Realtors, Realtors Association of Edmonton, and the Calgary Real Estate Board. Most home prices are from May 2019, except for Camrose, Fort McMurray, Grand Prairie, Sylvan Lake, and Red Deer, were only April 2019 prices were available at the time of research. The most recent publicly available average home price for Lloydminster was December 2018 at the time of research. Median household income numbers for each region were sourced from Statistics Canada.

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