Finance Committee on Feb. 8th, 2017

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I would like to ask another question, but I do not know how much time I have left, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

You have a minute.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I will be very quick.

Nowadays, do more people qualify for a mortgage than in 1995, when I was 25?

[Paul Cardinal]

I cannot confirm that for you for 1995, but, before 2008, it was easier because, nowadays, the criteria are significantly more strict than they were then.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

However, even with the tightened criteria, there seem to be a lot more buyers on the market today than there were 20 or 25 years ago.

[Paul Cardinal]

In terms of the number of people who want to buy a house, the demand is stronger in part because our interest rates are at historical lows.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I'm sorry, Mr. Lancastle and Mr. Brewer. I wish I had more time.

[The Chair, Liberal, Wayne Easter]

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you all for being here. I have just one question. I'm going to share my time with my colleague.

For the witnesses, you're the last group of witnesses we're going to hear. Those of us on this side of the table would have liked to hear more, but your evidence has been so compelling that I think there are some people at the table who have heard enough. Let's say that.

The two gentlemen to the right of the chairman are analysts, and they take the evidence that is presented over the course of all these hearings, write a report, and bring it back to the committee. With my time I will summarize what I think I've heard, and I'd like each one of you to comment, and that might give our analysts a good running start on preparing their report.

This is what I think I heard, and I would ask each one of you, if there are things in this that aren't correct, to please say so. If this pretty much summarizes where you feel you're at, I'd like to hear that.

What I've heard is that there has been no consultation by government with stakeholders. The changes to the mortgage rules significantly reduce the number of people who are eligible to purchase homes for the first time. The government implemented a one-size-fits-all model to try to fix problems that are primarily in Toronto and Vancouver. Communities outside Vancouver and Toronto are seeing fewer sales, especially to first-time homebuyers. There are fewer housing starts. There is increased pressure on the rental market due to the inability of first-time homebuyers to buy a home. Fewer people are buying homes, and therefore fewer homes are being built, which is actually reducing jobs in the country and not creating them. Arrears and delinquencies in home ownership are not a cause for concern in our country. And, frankly, the government should admit it made a mistake and reverse the decision made last October.

I would appreciate comments on that.

[The Chair, Liberal, Wayne Easter]

Who wants to start?

Mr. Lancastle.

[Keith Lancastle]

Thank you very much, Mr. Chairman.

Our organization would say that we believe that Canada's real estate market has been exceptionally well served by the regulatory framework that has been in existence. We have the opportunity to interact with our colleagues internationally and have observed what has happened in other real estate markets when the fundamentals of mortgage underwriting are askew. When the process does not place adequate emphasis on the borrower's capacity and willingness to repay, higher-risk borrowers enter the market, which can have disastrous implications.

Our organization is perhaps somewhat unique in that our members have no vested interest in the outcome of the transaction. We're focused on the health of the marketplace, up markets and down markets. It is our contention and our belief that the consistent application of the type of regulatory framework that has existed in our country would continue to serve Canadians and the marketplace well.

That would be our comment in response.

[The Chair, Liberal, Wayne Easter]

Ms. Guy, go ahead.

[Pénéla Guy]

We're going to share the answers to your questions and statements.

I have to agree with you that there was no consultation prior to the decision being made. When you talk about there being fewer first-time buyers, we've heard that it may be a little early to really come out with strong and reliable statistics. I can tell you that we're hearing from our members on the ground that, yes, there are a lot of people who were in the process of looking at homes and wanting to become homeowners who have decided to wait and postpone their decision.

[Paul Cardinal]

To expand on my colleague's reply about activity, it is indeed too soon to tell. From the November, December and January results, we have not yet seen a downward impact on the number of real estate transactions. However, we are expecting that to be the case in the spring, which is traditionally the time when first-time buyers are most active in the market.

However, if we go by the mortgage tightening in July 2012, when the maximum amortization period decreased from 30 years to 25, that caused an 8% drop in resales in Quebec, followed by a somewhat smaller drop in 2014. That shows that it did indeed have an impact on the market and, in our opinion, it could be somewhat similar to the impact that was expected in 2013.

You also mentioned mortgages that are in arrears. At the moment, that figure is very low in Quebec, where only three mortgages in one thousand are more than 90 days in arrears. As I said before, if we try to look into the future and suggest what the factor determining that variable will be, we can see that, in the first analysis, it is employment, much more than interest rates, that makes up the determining factor. So, during times when employment is slowing down, we have seen that rate increase, but there was not necessarily a correlation with major increases in interest rates.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cardinal.

Mr. Graham, do you have anything to add?

[David Graham]

Yes.

I can't comment on your many questions, but I think that it affects our local market, and every market is regional. Our market is a secondary market. It's very, very different from that in Vancouver and Toronto. Preventing our first-time homebuyers from getting into the market, as I mentioned, has a second-round effect and third-round effect that are not good for our economy and not good for home ownership.

The predominant question that I would like to ask is what happens as an alternative to first-time homebuyers being able to put a mortgage in place and having a forced savings plan? What are their spending habits? Are they spending on an expensive car? Are they spending it on vacations—which I figure is a great way to spend your money. Are they being frivolous with their money? Are they not starting asset accumulation? I think that's very important.

With regard to high household indebtedness, it's much more difficult for us to comment on that. I think that if I were to take the value of a home and the substance of a home in Canada, which is backed by rigorous mortgage regulations, it couldn't be compared to those things in the United States. In the United States, at one time they could self-assess; they could put zero per cent down; they could write off their mortgages, and they could buy several homes at a time. It's a very, very different market.

I'd simply like those questions answered.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

Mrs. Guy, in one of the recommendations you made, you mentioned that the Home Buyers Plan must be expanded.

Could you tell us how you would like to see it expanded?

[Pénéla Guy]

Actually, the Québec Federation of Real Estate Boards supports the demands made by the Canadian Real Estate Association. One of the ways of expanding the plan is to expand eligibility, meaning to be able to use more of one's disposable income in order to invest in real estate.

We also support the proposal that the APCHQ made to you, that is the ability to use income intergenerationally so that parents can help their children to buy a house and become homeowners. That is another example of the way in which the plan can be expanded. Other reasons have been put forward as well, such as changes in employment, divorce, and so on. Those are examples of ways in which the plan can be expanded. Of course, it is also important for it to be indexed, because that has not happened for a long time now.

Am I forgetting anything, Mr. Cardinal?

[Paul Cardinal]

No.

[Pénéla Guy]

That concludes what I had to say.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

When the APCHQ representatives appeared before the committee, I asked them another set of questions. I also mentioned them to your representatives in a previous session. I am quite favourable to the idea and, basically, I feel that it's a good one. However, like all good ideas, there can be abuse.

I have become aware of reports of potential abuse with the HBP, the Home Buyers Plan. It happens when one person transfers money in the form of an RRSP to the other spouse or contributes to the other spouse's RRSP in order for them to buy a home. The money is not repaid afterwards. So the family now has a second home. However, the two properties belong to two different individuals.

The money may not automatically be repaid, but it is taxed. However, if the spouse is not working, the tax is practically zero. So there they are with two homes coming from the same source of money. It seems to be happening more and more.

Could you confirm whether you are aware of the HBP being used in that way? My fear is that RRSPs given to children might also be used in the same way.

Could you address those concerns? My feeling is that, by virtue of its mandate, the plan is useful and a significant factor in providing access to a first home. I just want to make sure that is not being misused.

[Pénéla Guy]

It is difficult for me to make a judgment or comment on the situation you are describing to us. What we can tell you is that we consider that home ownership is very important and this is a tool that allows it to happen. Clearly, in all government decisions, controls must be put in place. I can also tell you that we do not hear from our members very often about the situation you are describing.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Has any other organization heard comments about the matter, either in Nova Scotia, or from appraisers?

[Keith Lancastle]

No.