Blog › February 2012

HST/PST Transitional Rules


Newsflesh - February, 17, 2011.

Government announces new HST/PST housing transitional rules

The government today announced the HST/PST transitional rules on new homes.

As the province transitions back to the PST, which will replace the HST effective April 1, 2013, measures to ease the HST burden on new home buyers include:

  • The BC New Housing Rebate threshold will increase to $850,000 from $525,000, so that more than 90% of newly built homes will now be eligible for a provincial HST rebate effective April 1, 2012.
  • The maximum rebate will increase to $42,500 from $26,250 effective April 1, 2012.
  • Buyers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital Regional Districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.
  • For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the 7% provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of 2% on the full house price. 

HST/PST transition rules will help ensure that whenever purchasers buy a new home they will all pay a consistent and equitable amount of tax, whether the home is built:

  • entirely under the HST;
  • entirely under the PST; or
  • partly under HST and partly under the PST.

The temporary housing transition measures will be in place until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.

REBGV successfully advocated for the following:

  • An increase in the threshold value of homes to be covered by the rebate;
  • An increase in the rebate amount;
  • An announcement of the transition rules for new homes as early as possible.

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Metro Vancouver Housing Starts


Metro Vancouver housing starts for January, 2012

CMHC reported on January 8, 2012 that "housing starts in metro Vancouver were 8% higher at 1,555 compared to 1,436 in January 2011. British Columbia’s urban centres were up 28% in January compared to December" Condominiums at 74% of the total housing starts are the dominant sector for new construction permits. View homes for sale in Greater Vancouver, Fraser Valley and Chilliwack.

multiple-family starts accounted for about four-fifths of the housing starts in urban areas of the province, mostly in Vancouver, Burnaby, Nanaimo, Coquitlam and Surrey.

Population growth

Statistics Canada released census data showing B.C.’s population grew to 4.4 million over the last five years, making it the second-fastest growing province next to Alberta.

In Metro Vancouver, there were 1,555 housing starts in January 2012, 1,155 of them multi-family, compared with 1,436 starts, 1,256 of them multi-family, in January 2011.

There are many reasons for the growth in multi-family housing in urban areas. Cost of housing, demographics and lifestyle are the main factors for the growth in multi-family construction. The trend toward multi-family construction will continue as condos and townhouses are more affordable to home buyers. More people moving to B.C. and baby boomers downsize are important factors for the growing trend for multi-family developments.

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Vancouver condo market on watch list


B.C. vulnerable as 'nation's weak spot'

"Canada's housing market is not a bubble, it's a balloon. And unlike the catastrophic decline the U.S. housing market experienced in 2008, the market in Canada will deflate slowly rather than pop, according to a report by BMO Capital Markets".

In Vancouver, though, where house prices have gone up 159 per cent in the last 10 years - compared to 104 per cent nationally - the ratio of price to income is 10, nearly double what it was a decade ago. Read the full article here.

According to documents obtained by Bloomberg under freedom of information law request from the Office of the Superintendent of Financial Institutions, Banks and other lenders are becoming "increasingly liberal" with mortgages and home-equity credit lines that don't require individuals to prove their income.

Bloomberg reported, "Non-income qualified" lending is one of the issues to be considered by OSFI's "emerging-risk committee."

Leaning too hard on lending could sink the housing market

Canadian Banks will have major concerns on tightening lending too much on "equity lending" and mortgages provided to "New Immigrants". Presently, these borrowers do not need to provide proof of "sufficient income" to qualify for 65%/70% financing. Other borrowers have to provide proof that their mortgage payments are under 40% of their total financial obligations.

It will be a fine balance that has to be work out on the new lending guidelines (if any) between the Government and Canadian Banks for equity home financing. The tightening to deflat the high home prices may be too late, as any price correction from current level especially in Greater Vancouver in the magnitude of 20% or 25% will seriously damage the B.C.  economy.

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BCREA 2012 1st Quarter houusing forecast


Average performance for housing market in 2012

chart

British Columbia Real Estate Association (BCREA) recently released its 2012 First Quarter Housing Forecast Update.

“Modest economic growth at home and abroad is expected to limit growth in consumer demand both this year and in 2013,” said Cameron Muir, BCREA Chief Economist.

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 2.1 per cent from 76,817 units in 2011 to 78,400 units this year, increasing a further 2.7 per cent to 80,500 units in 2013. The 15-year average is 79,000 unit sales. A record 106,310 MLS® residential sales were recorded in 2005.

Read the full report here.

Will housing affordability affecting the forecast?

2011Chart

Based on the average 10 years sales figure around 85,000 units, 2012 and 2013 forecasts by BCREA are below the 10 years average sales. But, if the more recent declining trend line from 2005 is plotted against sales the past 6 years, sales for 2012 coulld end up to be around 72,000 units.

2005 was a significant year for home Greater Vancouver home topping, while detached home prices made gains every year except 2008 (as a result of the crdit crunch).

Housing affordability will also shift housing sales from detached houses to lower priced condos and townhouses. The suburbs could benefit from increased sales as homes are priced much lower than the major city centers close to Vancouver.

 

The recent bank tightening on equity financing on Line of Credit, review of equity mortgage lending to home buyers and New Immigrants could curtail home sales for 2012. If home sales in Greater Vancouver drop 10% from 2011 levle, we could end up with sale at around 69,100 units for 2012. It's anybody's guess as there are much uncertainties in the housing market.

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Government concerned with the health of Canadian housing market


Loose bank lending to be curtailed

Bloomberg released documents on concerns raised by the Office of the Superintendent of Financial Institutions (OSFI) that loosening mortgage standards poses an "emerging risk" to Canada's economy. The 152-page documents, revealed that OSFI worries banks are becoming "increasingly liberal" by handing out loans without requiring borrowers to prove they have sufficient incomes to pay them back.

2011ChartFinance Minister Jim Flaherty said he shares the concern of Canada's top banking regulator, that lenders are loosening their mortgage standards too much, but said any problems in the system are being corrected.

The Globe and Mail's article "Ottawa leans on banks to tighten lending" reported the Government convers with record-low mortgage rates being offered by some Canadian banks and the ease with which some institutions are advancing lines of credit. 

Too hot to handle

In another artilce by Moneyville.ca "Mortgage pullback hints of housing crisis" reported FirstLine, is no longer accepting new applications from so-called “stated-income” homebuyers. FirstLine is CIBC’s wholesale mortgage arm, announced Tuesday that it will no longer accept applications from homebuyers who can’t prove they have the annual net income to qualify for home loans.

In recent weeks, multiple stories cast some doubt on the sustainability of Canada's booming housing market. The Globe and Mail's article "Connect the housing bubble dots: There could be trouble on CMHC’s horizon" hightlighted the danger in the housing market. A housing price correction in the order of 10% or more will result in many home buyers owing more than their homes are worth.

Precarious trends for 2012

January 2012 ended with a not too encouraging outlook for the Greater Vancouver housing market. Overall sales activity during January 2012 was at or near record lows of the previous 10 years. But, January 2012 started off with a record new listing volumes of 5,763 homes. 

This is 20% higher compared to the 4,801 units listed in January 2011, and a 6.4% increase compared to previous record January 2010 when 5,417 homes were listed. The total number of homes for sale in Greater Vancouver at 12,544 was 20% more than the total active listings at the end of January 2011.

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New Listing 3540 DRINKWATER RD, No City Value, BC


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