Just over a thousand would-be first-time home buyers have taken the province up on its new down payment loan program, according to new numbers from the Ministry of Housing.
Of those applications, 831 have been approved, and 270 of them representing about $4.1 million dollars in loan money, have actually signed a deal to buy a property.
By far the largest number of applications, just over half of the total, came from Metro Vancouver. The Victoria-capital region saw the second most interest with 95 applications, followed by the Central Okanagan with 58 and Fraser Valley with 56.
Click a region to see how many people applied for the down payment loan
The program, announced by Premier Christy Clark back in December, matches down payments by lending first time home buyers up to five per cent of the cost of a home priced under $750,000, and is interest free for the first five years of a 25 year term.
The province estimates it will shell out about $700-million over the next three years in loans, funding a potential 42,000 new home sales.
Propping up prices?
However, while more than a thousand British Columbians have been happy to take the province up on its loan offer, not everyone is convinced it’s good policy.
UBC Sauder School of Business economist Tom Davidoff says the cash infusion is likely one of the forces continuing to drive prices up, just when it seemed like the real estate market was cooling.
“My back of the envelope calculation suggests something on the order of seven per cent of transactions under $750,000 now probably are people who are participating in this program, and that may be having as much of an impact on prices as something in the range of five to 15 per cent. So the market might be up about 10 per cent higher in terms of prices than it would be without the program.”
Earlier this month, the Greater Vancouver Real Estate Board reported that home prices had dipped 2.8 per cent over the last six months, but had climbed 1.2 per cent from January, the month the program kicked off.
In that sense, Davidoff says he’s skeptical the program is doing much to actually help buyers and instead seems to be propping up the market in the wake of the 15 per cent foreign buyers’ tax.
“When you don’t add new supply, stimulating demand just pushes up prices and most of the benefit just goes to sellers. So I imagine the intent was exactly to make sure the market didn’t crash in the short run.”
The program has also raised some concerns that buyers were essentially taking on a “second mortgage,” and Davidoff warns that the additional debt does come with significant risks for borrowers, who could find themselves in trouble if interest rates rise.