The B.C. Liberal government has received more than 1,000 applications from first-time home buyers who have been lured by new incentives under a program designed to improve housing affordability.
Critics, however, say the program is adding fuel to an already heated market for condos, notably in the Vancouver region.
The province's new Home Owner Mortgage and Equity (HOME) partnership – aimed at making it easier for B.C. residents to come up with down payments for their first-time purchase – took effect on Jan. 16. Since then, the government has approved 831 of the 1,008 applicants.
"Of those, 270 applicants have entered into an unconditional contract of purchase and sale for a home," according to a statement from BC Housing, which is overseen by B.C. Deputy Premier Rich Coleman.
The loan value of the 270 applications will total $4.1-million upon the closings. Over the past two months since the program's introduction, the province has preapproved a further 561 applicants.
In Metro Vancouver, 432 applicants have been approved or preapproved.
"A small number of people can have a pretty big influence on the market," said real estate economist Tom Davidoff of the University of British Columbia's Sauder School of Business. "What's dumb about this is it's stimulating demand. You have too much demand for not enough supply. It's pretty crazy. It sounds like you're doing first-time buyers a favour, but the big winners here are the condo sellers."
Under the HOME program, the B.C. government will match down payments of up to $37,500 made by first-time buyers purchasing any home priced up to $750,000. These applicants can obtain 25-year loans – free of interest for the first five years, if they commit to living in the unit for the initial five years.
Since mid-January, the new program has been a key ingredient in inflating prices by almost 10 per cent for the lowest tier of properties in the Vancouver region, Prof. Davidoff estimated.
"Ottawa has been saying let's have fewer highly leveraged buyers, but the province is saying we have to help the risky, leveraged first-time buyers get into the market," Prof. Davidoff said in an interview Sunday. "The province has sweetened the pot."
Vancouver real estate agent Steve Saretsky, who specializes in the condo market, said bidding wars resulting in winning offers above asking prices for condos have been common this year.
"The government is adding more demand to a market segment that really doesn't need it. They're giving more money to first-time buyers to bid up prices. It's making the condo market even hotter and driving up prices even higher," he said.
Mr. Saretsky cancelled his scheduled open house for a condo in Richmond on Sunday because the one-bedroom unit sold on Friday above the asking price.
The B.C. government has been touting its measures for first-time buyers in TV advertisements, as well as drawing attention to the province's August roll out of a 15-per-cent tax on foreign home purchasers.
B.C. NDP housing critic David Eby said the incentives under the HOME campaign are not only misguided but have fallen well short of the Liberals' targets. The province has budgeted more than $700-million over a three-year period to help 42,000 households enter the housing market, but he said the program has stumbled out of the gate.
"It's just an attempt to buy votes and look like they're doing something on the housing market, and, thank God, people are seeing through it," Mr. Eby said. "Certainly what needs to happen is not more loans for people but a greater supply of affordable housing."
If the NDP were to win the May 9 provincial election, the party wouldn't cancel "the stupid program" but would conduct a review to unveil smart ways to help B.C. residents in the entry-level housing sector, he said. "There might be a better allocation for the $700-million."
Sales have fallen sharply for detached houses, condos and townhomes in the Vancouver area since peaking last March. While average prices for detached properties have slipped over the past year, they have risen to record highs for condos and townhomes amid decreases in new listings.
Industry experts say the shrinking number of purchasers who are not Canadian citizens or permanent residents is especially noticeable for luxury detached houses.
Between June 10, 2016, and Feb. 28, foreign buyers accounted for 6 per cent of the total number of transactions in Metro Vancouver, according to the B.C. Finance Ministry.