Looking at it from first impression, the announcement of the British Columbia government might look very attractive for first-time buyers who are finding it difficult to put together a down payment but after taking a closer look at the program critics and economic analysts have cry down the loan.
Surprisingly, housing experts are in one accord of this new loan and are sending negative criticism towards the loan claiming that it is just one of the government’s political strategies for the upcoming elections.
The new interest-free loan program endorsed by the government according to experts could result to an increase in demand which in turn will lead to an increase in home prices as there is a shortage in supply.
With a free-interest loan, first-time buyers would be chasing after the same available houses in the market and for Joshua Gottlieb of the Vancouver School of Economics, the government did not take into consideration the current housing condition before creating the program.
According to him, the program will be helping just a small number of people while putting a greater number of people at risk.
The government is still being awaited to make a respond to what experts think about the program but Premier Christy Clark has noted that the program would be a productive way to help first-time buyers that have been let out of the housing market for such a long time.
Tom Davidoff, an economist and housing expert at the University of British Columbia’s Sauder School of Business expressed that at this point in the time the least the real estate market needs is a boost as it is finding ways to decline.
For many experts also, the announcement of the government is well placed as elections are just around the corner.
Paul Kershaw described the program as “right intention, wrong execution.” He added that the loan would motivate people to borrow more and hike home prices.
Bryan Yu, a senior economist with Central 1 Credit Union explained that although the new program might not have much negative effect on people, he is still baffled that if this is the right decision for the government to make to address that current housing crisis.
Critics and academics are however in unison that the driving force to the rising home prices comes from the shortage in supply and this is the main concern the government should be trying to address.