The BC HOME Partnership Program (HPP), which offers first-time buyers a loan to help with their down payment, has had relatively little impact on condo and townhome prices, according to the findings of a recent report by the BC Real Estate Association (BCREA).
The report, The Impact of the BC HOME Partnership Program on Metro Vancouver Home Prices, calculated that the program had the effect of increasing Metro Vancouver condo prices by 0.55 per cent, year over year, and townhouses by 0.57 per cent.
The calculations were made by BCREA economists using a sales-to-active-listings ratio model (SALR, which measures demand versus existing supply of homes for sale) and the correlating annual rise in prices. They also found that the HPP was instrumental in 0.2 per cent of home purchases in Metro Vancouver during the initial period of operation up to September 2017.
The authors said that Metro Vancouver condo prices had risen by 18.61 per cent on an annual basis, as of September 2017, and that based on their SALR model, if the HPP-purchased condos had never been purchased and remained in supply, the annual condo price increase would have been 18.06 per cent. They found a similar result for townhomes – a rise of 14.75 per cent, which they said would have been 14.18 per cent if the HPP-purchased townhomes had remained unsold and available.
Cameron Muir, BCREA chief economist, added, “This analysis incorporates the most liberal assumption that all successful HPP applicants would not have purchased a home without the added assistance of the program. Even under this discipline, we find the program was not a significant driver of price appreciation in the Metro Vancouver housing market.”
The report added, “Our analysis indicates that the HPP was helpful to many homebuyers, but not popular enough to cause a significant impact on market conditions, given the program timing coincided with already constrained supply conditions.”
The report appears to contradict fears expressed on the launch of the HPP that any benefit of the program would be eaten up in corresponding higher home prices. Joshua Gottlieb, National Bureau of Economic Research faculty research fellow, UBC, was one of several UBC economics professors to criticize the program when it was announced.
Gottlieb told media at the time, “It’s a pretty bad idea. It is counter-productive and if you give people more purchasing power, they will be able to bid up the prices of the homes that they’re looking at, and that price increase will eat up any benefit from the subsidy. The same people who were going to compete for a home at $500,000 are still going to be competing for that same unit, but at a higher price. They’re just going to compete away the benefit. The only people who gain are existing homeowners or developers who benefit from these higher prices.”