Today’s announcement from Finance Minister Bill Morneau brought change to the way that real estate will be conducted across the country. Starting on February 15, 2016, buyers will now be required to provide a minimum down payment of 10% on all homes that are priced above $500,000. However, the higher percentage will only apply on the dollar value in excess of that price. For example, if a buyer was to purchase a home valued at $750,000, the down payment would be $50,000; $25,000 on the first $500,000 at 5% and $25,000 on the additional $250,000 at 10%.
Here in Edmonton, the average sale price of a single family home is well below the threshold at $438,172. But while the average home buyer in our area will not be directly affected, there is still cause for some concern.
“Edmonton’s housing market is a key contributor to Alberta’s economy and an important job creator. At a time of economic uncertainty in Alberta, we do not think it is necessary to put undue stress on balanced markets like Edmonton’s by creating rules that constrain buying activity. While the REALTORS® Association of Edmonton recognizes that home buyers should exercise prudence when taking on debt to buy a home, we are not convinced that government rules are needed to control home buyer’s options,” said Association Chair Geneva Tetreault. “We are pleased that the tiered approach should have little effect on first time home buyers looking to get into the market. However, we will continue to watch the Edmonton market to see what effects this national change has locally.”
So far this year, 2,721 residential properties sold for over $500,000 in the Edmonton Area.
Currently, the 5% down payment is only in effect for homes priced at less than $1 million. Buyers looking for homes above that range are required, by law, to provide a minimum of 20%.