Incentives in federal budget could drive up housing demand on P.E.I. even more, says economics prof

Offering incentives to first-time home buyers could drive up demand — and with it, prices — when what P.E.I.'s housing crunch really needs is more supply, says UPEI economics professor Jim Sentance.

The federal government announced in its budget Tuesday it is increasing the RRSP withdrawal limit for first-time home buyers to $35,000 from $25,000. It also introduced programs to allow first-time home buyers to lower their borrowing costs.

But Sentance said those initiatives largely push demand instead of supply, and could contribute to Canadians' already high debt levels.

"I think the fear is that if you just give people more money to buy houses or make it easier for people to buy houses they'll just bid up the price," he said in an interview with CBC News: Compass host Louise Martin. 

Items that could benefit Islanders

While it didn't have the "huge news" like the Canada Child Benefit introduced in 2015, Tuesday's budget did include some items that could benefit Islanders, Sentance said.

He said the commitment to create more rental properties could help, and money promised for lndigenous programs was needed.

Allowing low-income working seniors to earn more without giving up Guaranteed Income Supplement benefits is also a positive move for Islanders, Sentance said.

"If you look at the Island's labour force we have a somewhat older population than a lot of provinces, and the percentage of people over 65 that are working now is relatively high and increasing a bit so we can probably take a bit more advantage of that than some."

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