Does RRSP Home Buyers' Plan make sense?

Does RRSP Home Buyers' Plan make sense?

Does RRSP Home Buyers

How many first-time homebuyers have enough RRSPs saved to participate in the incentive program included in last week’s federal budget?

“The thing to think about is the increase on the RRSP limit—a first-time buyer in our market with $25,000 to withdraw is rare; a first-time buyer with $35,000 saved is even rarer,” Kingston-based Karen Matthey, co-owner of The Mortgage Professionals in the Verico network, said of the RRSP Home Buyers’ Plan.

“Most of the first-time buyers we see struggle to get 5% down, between paying off debts, student loans and other payments. It’s not as straight forward as just increasing the RRSP limit and expecting that it will somehow help.”

In nearby Ottawa, the real estate board is similarly befuddled by the presumption that first-time buyers, who are typically in their early-to-mid-30s, have RRSPs savings sufficient enough to participate in the incentive program.

“While the government has said these measures are to help millennials specifically, we question whether this cohort actually has this amount invested in RRSPs and whether they will be able to qualify for a shared-equity mortgage program,” said Dwight Delahunt, president of the Ottawa Real Estate Board. “Many millennials are facing affordability issues related to their income levels and student debt.

“Some first-time homebuyers will be assisted through the shared-equity mortgage program and the increase of RRSP withdrawals to $35,000. However, we would’ve preferred a measure such as the one we proposed to government to increase the first-time homebuyers’ tax credit from $750 to $2500 as this would not have created another debt to be repaid.

Most would-be first-time buyers struggle to save for down payments and in Kingston Matthey says that most buyers tend to buy resale homes rather than new builds.

“I would estimate that the number of mortgages we’re doing for first-time homebuyers on new builds is not as common as resale properties because the latter is cheaper in our market. We don’t have a booming condo market in Kingston, and the ones we do are mostly high-end condos. We see first-time buyer purchase single-family and townhomes where the average price is closer to $275,000.”