As far as budgets go, it is hard to argue with major investments in core infrastructure including the likes of continued and needed flood protection, Winnipeg street upgrades and new investments in CentrePort Canada Way. A $5.5 billion five-year infrastructure plan was the centerpiece of the provincial budget brought down on March 6, 2014. Huge expectations are riding on this budget to deliver thousands of jobs and billions of dollars in revenue based on all this planned new investment.
How it all comes together and is managed will unfold in due course. Given the magnitude of Manitoba’s running deficit and overall debt picture, it leaves no doubt expenditure of these tax dollars must be heavily scrutinized and done with the utmost of care to ensure projects will be delivered in a timely and cost effective manner. Another key piece in this major undertaking is how well the three levels of government can work together to maximize the dollars that will be available in the upcoming years.
“Given what we have just witnessed this winter in Winnipeg alone is an eye-opener for all Manitobans what investments we need to make to sustain our communities and create a better quality of life year round,” said David Powell, president of WinnipegREALTORS®. “This should not detract from all of the exciting new developments we are seeing to make our city a place you can enjoy and take pride in.”
One investment overlooked and ignored in this year’s provincial budget was helping out those home buyers most vulnerable to higher housing costs. They are first-time buyers and are a key segment of any real estate market. In the National Association of REALTORS® 2012 profile of home buyers and sellers in the United States, it states the share of first-time buyers was 39 per cent, just one per cent off the historical norm of 40 per cent. While there is no equivalent survey for Canada, it is safe to assume our percentages will be high as well. Why? Canada’s rate of home ownership has surpassed the United States and recent survey results by Ipsos Reid for the Ontario Real Estate Association show younger people still covet a home.
“A large majority of younger Ontarians believe that owning a home makes more sense than renting, “says Sean Simpson, VP, Ipsos Public Affairs. The 2014 survey shows percentages supporting owning a home for both Generation X (born from 1965 to 1980) and Generation Y (born from 1981 to 1995) are in the high 70s.
And it is not only the sheer numbers of first-time buyers that are important to real estate sales activity as evident from the comment made by the chief economist of the California Association of REALTORS®. Leslie Appleton-Young says, “We have a ladder of homeownership and need first-time home buyers beginning the process of owning, building equity and trading up to have a healthy housing sector.”
The rungs on this ladder go all the way up to enabling a home seller to build their own home. Mike Moore, president of the Manitoba Home Builders’ Association agrees. “With our average new home price over $400,000 now it often requires the sale of an existing home to enable a new home purchaser to afford their new acquisition. It would not be overstated to say we are dependent on resale housing to fuel our new home starts.”
How can the provincial government help young first-time buyers? Do what B.C. has done since 1994 and provide first-time buyers with meaningful tax relief from the land transfer tax – an upfront closing cost that can amount to thousands of dollars depending upon the price of the home. Not only will it make home ownership a reality for some that are unable to gain entry to the Winnipeg market but it will free up scarce rental accommodations for new immigrants and other Manitobans not in a position nor interested in owning a home. In B.C.’s 2014 budget they increased the first-time home buyers’ exemption for their land transfer tax from $425,000 to $475,000.
“ The sad part of this glaring omission in Manitoba’s budget is the provincial government could have at least matched the federal government’s $750 first-time buyer tax credit and still would have collected more revenue this year from the land transfer tax than they took in 2013,” said Peter Squire, WinnipegREALTORS® MLS® market analyst. “This does not factor in all of the economic spin-offs and jobs the housing sector creates in our local economy.”