Nova Scotia real estate went from one of Canada’s fastest booms to one of its sharpest corrections. Naturally, the Government of Nova Scotia (GNS) is now scrambling to launch a new First-Time Homebuyers Program (FTHP). The scheme aims to let new buyers into the market with as little as 2% down, with the province absorbing most of the risk. The goal sounds noble, but it’s launching as demand cools, inventory climbs, and prices plunge, making it look more like a predatory, 2008-style scheme than help.
Nova Scotia Real Estate Prices Surged, But Demand Is Now Past Peak
Nova Scotia’s soaring home prices were a boom heard across the country. The price of a typical home surged 84.5% from January 2020 to April 2022, ahead of Canada’s immigration surge that followed shortly after. A low-rate-driven boom and influx of residents from Toronto looking for cheaper housing helped fuel a speculative boom. Sales are now back to normal, but inventory continues to climb—and a flood of investor-owned new construction is set to hit the market soon. Obviously, the Province thinks now is the perfect time to “help” first-time home buyers get into the market.
Nova Scotia Launches First-Time Home Buyers Pilot Program
The province recently launched its First-Time Home Buyers Pilot Program to drum up some sales. The program is being sold as a way to help first-time home buyers achieve ownership with as little as 2% down. It’s administered by credit unions, with taxpayers in the province behind the guarantee. The high-level details for those just hearing about it:
- 2% downpayment: Lowering the high-ratio minimum from 5%;
- Waiving the standard high-ratio insurance premium charged by CMHC/Sagen, as the Province acts as the guarantor
- Maximum $570,000 in Halifax Regional Municipality (HRM) and $500,000 in the rest of the province.
- Exclusive to participating Credit Unions (e.g., East Coast Credit Union, CUA, Valley Credit Union). Big banks are excluded.
- The maximum mortgage rate of Prime + 2%.
- A credit rating of 630, though those without a credit history can be verified with other “evidence of creditworthiness.”
- Must pass the federal B-20 mortgage stress test
Industry experts reading this have likely already spotted the problems here, and we’ll get to that. But first, let’s discuss the positives:
Great, since there are none, let’s move on to why buyers are probably better off saving up for at least a normal high-ratio mortgage.
Golden Handcuffs? First-Time Buyers Should Read The Fine Print
Prospective users should go over the fine print with a trusted mortgage professional, because it’s filled with landmines like a non-transferable deficiency guarantee. In plain English, the GNS states borrowers can move to a national bank or lender once they have 20% equity. Until then, the borrower is stuck with the originating lender. This kills the biggest money-saving tool borrowers have with their lender when negotiating rates: shopping around.
Being stuck at a lender, a borrower has no negotiating power, as they have no other choice. Capping the rate at Prime + 2% sounds good until one realizes a Government-backed mortgage has limited risk for the lender. As a result, similar CMHC-backed loans are typically prime minus 0.5%. Starting at just 2% equity would take about 7 to 9 years of principal repayment to hit 20% equity, assuming a modest market appreciation of 2-3%. Any appreciation might be generous considering the recent sharp move lower.
Come On In, The Water’s Fine: Nova Scotia Government Now Wants To Help First-Time Buyers Get In The Market w/2% Down
The price of a typical condo apartment in Halifax, Nova Scotia.
Source: CREA; Better Dwelling.
There was a lot of attention on Nova Scotia real estate prices on the way up, but they’ve suddenly changed course. CREA reported the price of an existing home in Halifax fell 1.8% in December, and almost doubled (3.2%) across the province. Both Halifax and Nova Scotia reported a 3.8% drop in condo apartments that month. Had this program existed in December, a buyer on December 1st would have had a high chance of seeing their whole down payment wiped out over the course of just 31 days—and then some if they bought a condo. Who takes that loss? Glad you asked!
Nova Scotia Takes A Page Out of The US Housing Bubble Collapse
In the event of losses, the province pays 90% and the credit union absorbs the remaining 10%. Bad news for taxpayers, but losses are less likely because this program operates as a capital cushioning scheme.
Remember the story about those reckless “poors” who caused the subprime housing bubble in the US? Only part of that’s true—later research shows prime credit investors were using subprime lenders to obtain excess leverage. When the market crashed, investors walked away from their losses and defaulted. Actual subprime borrowers performed as expected, since these households still need a place to live. They rode out negative equity for 10+ years—falling behind, but paying their bills.
This isn’t a new problem, but how housing bubbles work. That’s where capital cushioning comes in: by transferring ownership from low-use owners (investors) to high-use (first-time buyers), policymakers effectively mitigate losses by leaving young adults holding the bag.
The province also has a lot more investors than it’s used to.
Nova Scotia Real Estate Investor Dominance
Nova Scotia has long been investor-heavy, but it hasn’t been this speculator-heavy until recently. StatCan’s Canadian Housing Statistics Program (CHSP) shows over 30% of homes in the province were investor-owned in 2023—the highest share in Canada. That’s a lot, but it’s not quite crisis levels. The concentration risk is the real issue: registry data shows most (~54.8%) Halifax condos built after 2016 are investor-owned. The CHSP uses property registry records, capturing those who own a property long enough to show up on the registry. Pre-construction flippers don’t.
Canada’s pre-construction boom has been increasingly investor-funded. Nova Scotia doesn’t track this data, but investors account for 70% to 80% of pre-construction purchases in cities like Toronto. A large portion of speculators flip units before completion though, leaving Toronto with a similar share of investor-owned units as Halifax by the time the building completes and registers. With Nova Scotia home prices rising at a faster rate than Toronto, it’s probably fair to say a similar share of investors are seeking a part of those returns.
Halifax Real Estate Braces For Surge of Inventory
New homes under construction in Halifax, Nova Scotia.
Source: CMHC; Better Dwelling.
Halifax had 13,997 new homes under construction in the middle of a frosty December, up 35.9% from a year prior. About 88.5% of those homes are apartments, and they’re coming to market fast—with more new construction set to start soon. That means one of two things: either end-user demand is so deep that no one has a problem buying at these prices, or a meaningful share are speculators counting on someone else to take the keys. Lucky for them, governments are usually on their side!
None of this is to say don’t buy a home. First-time buyers looking to purchase a home in this environment are much better off waiting a few months and saving to at least get an insured, high-ratio mortgage. Rushing into a market and overextending yourself while inventory is rising might work out, but it’s hard to see how.
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