March 2012 Market Update
On February 21st, the BC government announced the 2012/13 Provincial Budget (http://www.bcbudget.gov.bc.ca/2012/default.htm).
A fiscally conservative document, the budget calls for business tax hikes and a spending freeze in order to try and meet the government’s commitment to return to a balanced budget by fiscal year 2013/14. Also included in the budget are several changes that will affect the housing market in BC.
The first change, originally announced a week before the release of the budget, were the details surrounding the new HST/PST housing transitional rules. The new rules mean – starting April 1, 2012 and running through April 1, 2013, when the HST is replaced by the GST/PST – buyers of NEW homes will be eligible for a rebate of 71.43% of the provincial portion of the HST up to a maximum rebate of $42,500, up from the current $26,250. This means that buyers of homes up to $850,000, representing 90% of new homes built in this province, will not need to put off their buying decisions to 2013 to avoid paying additional tax. In addition, the rebate now covers recreational properties. Housing over that amount, however, may stagnate during this transition period. There are many subtle parts to these rules and I encourage you to see what situation affects you here: http://www.rebgv.org/sites/default/files/HST%20to%20PST%20Information%20Bulletin%20-%20February%2021%2C%202012.pdf
The second change, also being used as a transitional tool back to the GST/PST, is a tax credit for first-time buyers of NEW homes. The credit, worth 5% of the purchase price of a new home, capped at $10,000, will be effective until March 31, 2013 and is being put in to encourage first-time homebuyers to jump into the market prior to April 1, 2013. These two initiatives have been put in place to counter fears from the housing industry that buyers will put off their buying decisions until after the GST/PST transition is complete. And by covering 90% of the homes being built in this province, it should ensure that there is not a major slowdown in the housing industry. That said, it was written in this space 2 years ago, when the HST was first being introduced, that the HST’s introduction would have a ‘slightly negative, but negligible’ effect on housing prices and volume. Since that time, most jurisdictions in BC have seen strong sales and higher prices, indicating that our forecast was correct. That being the case, the reintroduction of the GST/PST is expected to also have a slightly positive, but still negligible, effect on the housing market. If you would like to learn more, please feel free to contact me at the email address or phone number above.
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