Thank you, Mr. Chair and honourable members.
I'm a representative and a board member of the Urban Development Institute. My name is David Graham. I'm also a developer in Halifax.
The Urban Development Institute board represents predominantly land, rental, condo, home, or building developers. In Halifax, we have experienced a decrease in the sale of new homes, single family homes, and detached homes over the course of the last four years. What had predominantly been a market of a thousand homes a year has decreased to a low in 2015 of 425 homes. This past year it was 550. It might caused by a variety of reasons. One of these is that we have an aging baby boomer population that's moving into rental accommodation. We also have immigrants who are coming in and moving into rental accommodation. As well, millennials, at this point, can't seem to get into the market in the way they would like to.
I think it's worth noting that 45% of the resale transactions in Halifax are for less than $250,000, and 75% of the housing resale transactions in Halifax are for less than $350,000. I emphasize that number because we're not Vancouver and we're not Toronto, and we don't want to have regulations imposed upon us that might be partly or entirely geared towards correcting a housing bubble in both Vancouver and Toronto.
To that end, we'd like the finance department to acknowledge or appreciate—and I'm sure it does—the very diverse and different markets that exist across the country.
While there are imbalances in the Canadian housing market, Halifax is a very stable market. It relies on first-time homebuyers to get into the market so as to generate a second round of home purchases, and in time, a third round and so on. Decreases in the number of first-time homebuyers in the market have a negative effect that will exacerbate a market that CMHC already categorizes as weak.
Because we believe that we have a balanced market, if the finance department is concerned about certain markets—and I emphasize Vancouver and Toronto—one way to avoid painting the secondary markets with that broad brush might be to properly apply regulations on home prices. Namely, we could potentially have a tiered system. We recommend that the finance department consider a tiered system in which the stress tests and new mortgage rules wouldn't apply to homes that are under a certain value—$350,000, for the sake of the argument. Such a policy would not be detrimental to markets that are currently in balance, which are predominantly secondary markets.
I will point out that the National Housing Act was expanded in 1954 to make home ownership more accessible to Canadians. New rules and modifications consistently reinforce this objective over time. In 1999, the National Housing Act and CMHC introduced a 5% down payment plan, removing a significant barrier for first-time homebuyers.
I will now draw on a hypothetical scenario. If defaults represented 0.5% of the market and we wanted first-time homebuyers to start asset accumulation at a young age in these low interest rate environments, then hypothetically, out of every 200 mortgages that would be recorded, 199 people would have the opportunity to be in asset accumulation at this time of historically low interest rates. One person would default.
We would like to ask the following questions to the finance department, if you would be kind enough to supply them for us: Can you provide more evidence on how you arrived at your conclusions to put new mortgage rules in place? Does data exist that follows the success—or the failure, as the case may be—of the initiative contained in the National Housing Act regulations of 1999 to have a 5% down payment plan? Is there data that can be used to compare any notable change in default rates as a result of this initiative or, conversely, the number of first-time homebuyers this initiative was able to get into home ownership?
Finally, in the context of getting first-time homebuyers into asset accumulation in the form of housing, have you modelled the consequences that come with the number of first-time homebuyers who are not able to buy a home and what their alternative spending habits are in the absence of such a forced savings plan?
Thank you for your time.