One of my concerns since the HST referendum has been the effect of 'new home sales'. Why would buyers pay the additional tax on new houses over $525,000 rather then buy a re-sale or just wait until October 2012 when the tax is abolished. Here is an interesting artticle from the Vancouver Sun to that issue.
Tax affected dwellings priced above $525,000
Plans to remove the HST and return to a provincial sales tax mixed with the Goods and Services Tax will probably cause some potential buyers of new homes in British Columbia to delay purchases until 2013, Central 1 Credit Union forecasts.
"People looking at new homes priced over $525,000 may very well wait until the tax changes lower the 12 per cent hit they face," Central 1 economist Bryan Yu said in a news release Thursday.
The HST added provincial tax to new housing, on top of GST, and $525,000 was the upper limit for a rebate program intended to add no additional tax on home sales.
Yu is forecasting that B.C.'s total home sales through the Multiple Listing Service will reach 88,200 units by the end of this year, which is down one per cent from 2010's sales mark.
However, while resale home transactions are forecast to end the year 4.7 per cent ahead of 2010, new-home transactions will lag by 26 per cent.
While sales will remain soft, the median price will rise 6.8 per cent to $417,000, Yu said.
"The real estate market will remain stable for the next couple years, weighed down by global economic issues, moderate employment and population growth and changes to mortgage insurance rules," Yu said.
Central 1 forecasts that next year total home sales are expected to increase by about 3.4 per cent, driven by higher new home sales. The resale of existing homes will decline.
Meanwhile, the Canadian Real Estate Association released a report Thursday showing that the sale of existing homes across Canada declined 0.5 per cent in August.
On a seasonally adjusted basis, sales totalled to 37,177 units during the month, down from 37,378 in the previous month, the industry group said. However, sales were still up 15.8 per cent from August 2010, on a nonadjusted basis.
The national average home price of $349,916 in August, on a non-adjusted basis, was up 7.7 per cent from a year earlier.
"[Economic] headwinds will likely persist until, and indeed after, fiscal quagmires in the U.S. and Europe are resolved. In the meantime, the Bank of Canada will have ample reason to delay raising interest rates further, which is supportive for the Canadian housing market."
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