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Consumers responding to reduced minimum downpayment, says CMHC.

Home sales in Northern Ontario have received a boost from the change to a five-per-cent minimum downpayment for new home buyers, according to the Canada Mortgage and Housing Corporation (CMHC).

Shari Corrigan, a CMHC senior market analyst in Sudbury, says 109 people in Sudbury have applied for CMHC's first-home loan insurance program, representing $8.5 million in total property value.

"We expected 10,000 nationwide. The total number for the first month is 6,100. The response is even greater than anticipated," Corrigan says.

Sam Butkovich, president of the Sault Ste. Marie Real Estate Board, agrees, noting that his area is experiencing a 30-per-cent increase in market activity from last year.

Butkovich also believes that the recent Algoma Steel restructuring announcement is helping the market in Sault Ste. Marie.

Art Darmanin, first vice-president of the Sudbury Real Estate Board, is also confident that sales have increased.

"I think we're up by 14 per cent. Business has definitely improved," Darmanin says.

CMHC reported that 12,693 households have made use of the program since it was first introduced on Feb. 3. The total value of the first-home loans is $1.2 billion. So far, 89 per cent of the first-home loans have been for existing houses.

However, not much impact is being felt from the federal government's plan to encourage home sales by allowing first-time buyers to borrow up to $20,000 from their registered retirement savings plans (RRSPs).

"We suspect that it has not had an effect because many people had rolled over or placed their contents into a vehicle already tied up," says Corrigan.

Information on the number of people buying homes with their RRSPs is sketchy, she adds.

"We don't have a good handle on the impact because the banks have the information on what kind of withdrawals take place."

However, Corrigan predicts that any impact on Sudbury home sales won't be seen until the third market quarter.

"Just because Revenue Canada allows this to happen doesn't mean the banks will allow people to withdraw their money," she explains.

Darmanin believes the RRSP incentive will have some impact, but not as much as the five-per-cent downpayment.

"Most people just don't have that kind of money in their RRSP," he explains.

Mike Fortin, past-president of the Timmins Real Estate Board, says the programs have generated a great deal of interest in his area, with sales increasing by approximately 10 to 15 per cent.

However, Fortin says the RRSP incentive is not having the effect that many people anticipated.

Ron Pigeau, president of the North Bay Real Estate Board, is cautious about stating what type of impact the incentives have had on home sales in his market.
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Title Annotation:Construction Report; Canada Mortgage and Housing Corporation
Author:Brown, Stewart
Publication:Northern Ontario Business
Date:May 1, 1992
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