On July 23, 2009, the B.C. government announced that it has reached an agreement with the federal government to combine the 7% B.C. PST with the 5% GST to create a single harmonized sales tax (HST). The new tax will come into effect on July 1, 2010. This article focuses on the effect of the HST on the real estate industry.

General

• The HST rate will be 12% (5% federal + 7% provincial)
• The PST will be eliminated completely
• There will be a partial rebate of the provincial portion of the HST of up to $20,000 on new housing
• Input tax credits will be available of HST in the same manner as under the current GST

New Housing

Currently under the GST, new housing is taxed while used housing is not. No housing sales are directly taxed under the PST, although the B.C. Ministry of Finance states that there is currently an average of 2% PST embedded in the cost of new homes from PST charges on construction materials. Under the HST, there would be no embedded tax but the full 12% HST would apply to new housing.

An HST partial rebate on new housing will be provided to purchasers in an amount equal to 5% of the purchase price up to a maximum rebate of $20,000. The Ministry's rationale is that because purchasers currently pay 2% embedded PST, the rebate would eliminate any tax increase on new housing sold for a purchase price of up to $400,000. The embedded PST aside, homes under $400,000 will be subject to a tax 2% higher than under the current system. Homes over $400,000 will be taxed at a rate 7% higher than under the current system, less a flat $20,000 rebate (in addition to the currently available GST new housing rebate currently available for prices up to $450,000). According to the Ministry of Finance, roughly half of new housing in urban B.C. is sold for over $400,000.

1. New home buyers may be eligible for the federal GST new housing rebate, which generally equals 36% of the tax paid on the first $350,000 of the purchase price. The amount of the GST rebate is phased out on a straight-line basis for homes priced between $350,000 and less than $450,000.

2. British Columbia proposed rebate for new housing is equal to 5% of the purchase price up to a maximum rebate of $20,000.

In order to avoid the increased tax burden on homes priced over $400,000, vendors and purchasers may consider, wherever possible, completing the sales of new homes prior to July 1, 2010 when the new HST comes into effect. See transitional rules below for more details.

Buyers in the market for a home may be considering purchasing resale properties in order to avoid the increased tax burden on new homes. While the tax on resale properties is not directly affected by the new HST, the cost to the purchaser of these homes may still increase slightly because services associated with the purchase may be subject to increased tax. For example, home inspection charges would be subject to HST.

Apartment Buildings

Residential landlords will face increased costs under the HST, since some goods and (especially) services not currently subject to the PST and necessary in the operation of apartment buildings will be taxed under the HST. As is currently the case with GST, landlords will not be able to claim input tax credits for HST paid and will not collect HST from tenants. Expenses such as maintenance, electricity and other services required by landlords will be taxed at 12% starting July 1, 2010.

Building Lots

Builders of new homes will be entitled to claim input tax credits for most HST paid on their inputs, such as raw land, just as they currently do with the GST. However, new homes in B.C. that are currently subject to the GST will become subject to HST as described above under the New Housing heading. These rules may be subject to anticipated transitional rules.

Commercial Sales and Leasing

Commercial sales and leases will not be materially impacted by the new system. The 12% HST will apply on commercial sales and leases just as the 5% GST does under the current system and input tax credits will be available to tenants and purchasers for the full amount paid.

Real Estate Commissions

Commissions will be subject to HST in the same manner as they currently attract GST. Commercial vendors will be able to claim input tax credits on HST paid to agents, while individuals selling personal use property will not.

Transitional Rules for Pre-Sales

On July 1, 2010, many homes in B.C. will be partially constructed or the subject of incomplete transactions. Although no transitional rules have been announced by the B.C. government to date, rules applicable to such homes will undoubtedly be announced in the future. In Ontario, where a similar HST will come into effect on July 1, 2010, transitional rules were recently released as follows:

• 5% GST will apply to sales where title or possession of new housing is transferred prior to July 2010
• 12% HST will apply to sales where title and possession of new housing is transferred after June 2010 unless grandfathered
• Sale agreements entered into prior to a specified date where title and possession of new housing is transferred after June 2010 will be grandfathered. In Ontario, that specified date is June 18, 2009, the date the transitional rules were announced. If the same approach is taken here, BC's rule will be effective the date its rules are announced or alternatively the July 23, 2009 announcement date (more likely the former than the latter)
• Where a sale is grandfathered and the building is wholly or partially completed after June 2010, the builder will be liable to pay a transitional tax intended to ensure the building has a tax content equal to what it would have had if constructed wholly prior to July 2010 (i.e., PST paid on all materials). Ontario has adopted an approach to dealing with condominiums whereby the builder must pay 2% of the selling price of the unit (Ontario's estimate of the PST content) and then claim a PST transitional credit for the estimated PST paid on materials prior to July 2010 (formula based). It is unknown if BC will adopt the same approach
• Where a sale is subject to HST and construction commenced prior to July 2010, the builder will be entitled to a PST transitional credit for the estimated PST paid on materials prior to July 2010 (formula based)

VANCOUVER — Spurred by record-low mortgage rates, provincial real estate sales should continue to rise through the remainder of 2009 from last year’s market fall, according to the B.C. Real Estate Association’s latest forecast.

Home sales have doubled since January’s near collapse in sales, association chief economist Cameron Muir said in a news release. He expects transactions recorded through the Multiple Listing Service to climb some 15 per cent from 2008 to 79,400 units.

Prices, although edging up from their declines through the last half of 2008, will remain below last year’s levels before showing slight gains again in 2010, according to Muir’s forecast.

The provincial average price for a home of $451,200 will be one per cent below the 2008 level, and should show a one-per-cent gain to $457,600 in 2010.

“When we look at the economy itself, we’re coming out of the recession, albeit slowly,” Muir said in an interview. “And the amount of demand we’ve obviously seen — year-to-date and going forward — [justifies] sales around or below the 10-year-average.”

B.C.’s 10-year average for housing resales is about 83,000 units.

Economic forecasts continue to indicate that the province’s recovery from recession will be slow, however. Central 1 Credit Union was the latest with its forecast that B.C. will experience below-average growth until 2012.

Muir’s expectation is for provincial unemployment to average 7.7 per cent this year, and go down only marginally next year.

However, he does expect the slow recovery from recession to start creating jobs that will help support demand for housing at that 10-year-average level.

Muir sees housing as a brighter spot in the economy, which will likely spill over into other areas, such as retail sales.

However, economist Helmut Pastrick, with Central 1 Credit Union, believes Muir’s forecasts are somewhat conservative given the pace of sales in recent months.

In answer to the question why, Pastrick replied, “Interest rates. It’s amazing the power of those low mortgage rates.”

Over the short term, with the Bank of Canada vowing to keep its trend-setting overnight rate at 0.25 per cent until the middle of next year, there seems to be little risk of mortgage rates rising.

Muir noted that most first-time homebuyers lock in mortgages for five-year fixed-rate terms, so they should be insulated from rising rates.

However, “if interest rates climb higher than expected, that’s going to pull demand out of the market as [a buyer’s ability to pay mortgage costs] is eroded.”

In a recent report, Scotiabank Economics senior economist Adrienne Warren noted that the average new mortgage payment in Canada in 2009 declined 26 per cent from its peak in 2007, due almost entirely to the reduction in mortgage interest rates.

Pastrick said the increase in interest rates should “be a self-correcting mechanism,” and if the province does not fall into the dreaded double-dip recession, they should rise as the overall economy improves.

“In a broader sense, at some point [low rates] run their course,” Pastrick said. “We know there will be a rate-normalization phase when economic growth does pick up.”

The recovery of sales, however, hasn’t been shared equally across the province. Metro Vancouver, Victoria and the Fraser Valley have seen relatively sharp rebounds, while the South Okanagan, the Kelowna to Vernon region and Kamloops are forecast to see much slower recoveries.

Muir expects housing starts to remain depressed for the remainder of this year, and not recover by a lot next year.

His forecast is for 14,800 new -home starts by the end of 2009, which is only slightly higher than the most recent low of 2000.

Muir added that if some of those starts do not materialize and they fall below 14,400, that will be the lowest level of new-home construction in the province since 1962.

depenner@vancouversun.com

The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®. For more information on real estate, statistics, and buying or selling a home, contact a local realtor® or visit www.rebgv.org.

Note: The MLSLink® Housing Price Index (HPI), established in 1995, is modeled on the Consumer Price Index (CPI) which measures the rate of price change for a basket of goods and services including food, clothing, shelter, and transportation. Instead of measuring goods and services, the HPI measures the change in the price of housing features. Thus, the HPI measures typical, pure price change (inflation or deflation).

The HPI benchmarks represent the price of a typical property within each market. The HPI takes into consideration what averages and medians do not – items such as lot size, age, number of rooms, etc. These features become the composite of the ‘typical house’ in a given area. Each month’s sales determine the current prices paid for bedrooms, bathrooms, fireplaces, etc. and apply those new values to the ‘typical’ house model.

This year, Greg is participating in the Easter Seals 24 Hour Relay For The Kids.

Any donation amount is welcome and any donation amount is appreciated.

This will give children with disabilities a chance to take a 6 day summer camp and give them a place to go where they're free from life's daily challenges.

Greg promises to run, walk, crawl or roll!

Please click here to donate at Greg's webpage:

http://www.24hourrelay.com/sites/default.aspx?TeamID=1046&RunnerID=25124

Increased demand steadies housing market in Greater Vancouver

Mortgage rates in Canada, which have plunged by almost 50 percent in the last year, aren’t likely to fall further, said Phil Soper, chief executive officer of Brookfield Real Estate Services Fund.

“Certainly with the Bank of Canada’s target rate set at virtually zero, there’s very little room,” Soper said today at a conference in Toronto on Canada’s real estate market. The rate is “the lowest it’s been in anyone in this room’s lifetime.”

Rates for home loans have been dropping during the biggest financial crisis since the Great Depression, with some lenders offering mortgages approaching 4 percent, Soper said. That compares with an average posted five-year rate of 7.5 percent a year ago, according to the Bank of Canada. He added that home prices in Canada aren’t likely to rise “sharply” over the next two years.

Bank of Montreal, which sponsored the conference, lowered its rate for a five-year fixed-rate mortgage this month to 4.15 percent.

“We are approaching almost zero interest rates,” at the Bank of Canada, said John Turner, the Toronto-based bank’s director of mortgages. “The question becomes, how much upward pressure will there be as we come out of this recession?”

The Bank of Canada last month cut its benchmark lending rate to 0.5 percent, its lowest ever, and said it’s preparing to use policies beyond interest rate moves to revive an economy hit by a recession and tight credit markets. The next rate announcement is April 21.

Canadian existing home sales rose in February for the first time since September as buyers took advantage of lower mortgage rates and prices, according to the Canadian Real Estate Association’s Multiple Listing Service. Sales of existing homes rose 8.6 percent from January to 28,669 units.

Bank of Montreal senior economist Sal Guatieri predicted that Canada’s housing market will decline further this year, without the “crash” experienced in the U.S.

Many buyers are out there looking, but seem nervous about making offers. They’re confused by what they’ve been reading and hearing about the state of the real estate market. The fact is, although sales and prices have both declined in different percentages around the country, they have remained relatively steady when compared with prices south of the border.

Typically the spring real estate market tends to experience more activity and with the Canadian economy experiencing a period of low mortgage rates and strong immigration, this trend could continue. According to Statistics Canada, Canada welcomed 247,202 permanent residents in 2008, 70,000 more than in 1998, and well within the government’s planned range of 240,000 to 265,000 new permanent residents for 2009. Many of these new immigrants will soon be in the market as First Time home buyers.

With the Bank of Canada dropping its prime lending rate this month, those in the market for a home will see mortgage rates at near record lows. This combined with the federal government’s decision to increase the withdrawal amount in the Home Buyers Plan from $20,000 to $25,000 will make buying a home a little easier.

Below is a brief summary of sales activities in some areas across the country:

GTA - Ontario
Toronto Real Estate Board Members reported 4,120 sales in February 2009 compared to 6,015 sales recorded in February 2008. The average home price was $361,305 last month compared to $382,048 during the same month last year.

On a month-over-month basis, sales and average price were above January levels of 2,670 and $343,632 respectively. The housing market is seasonal. Traditionally, in the first half of every year, sales and average price climb to their highest levels in late spring before trending lower from July onward.

Hamilton - Ontario
The Hamilton-Burlington area real estate market showed a total of 750 unit sales in February, indicating a 27.6% decrease over the same period last year, according to the Multiple Listing Services® (MLS®) statistics released by the REALTORS® Association of Hamilton-Burlington (RAHB). New units listed are less than 1% lower when compared to February 2008.
 
The total unit sales, when compared to January, were 58% higher in February. The average price of freehold residential properties sold in the month of February was $278,614, a decrease of 6% over the same month last year, but an increase of 1.5% over last month. Average price of condominiums in February was $200,618, a decrease of 4.2% over February 2008, and a decrease of 7% over last month.

Ottawa - Ontario
Members of the Ottawa Real Estate Board sold 787 residential properties in February through the Board’s Multiple Listing Service® system compared with 980 in February 2008, a decrease of 19.7%. There were 530 sales in January 2009. The average price of residential properties, including condominiums, sold in February in the Ottawa area was $273,719, a decrease of 2.9% over February 2008.

Edmonton - Alberta
The average price of most types of residential property slipped down a notch in February after a short rally in January. Sales numbers climbed across the 1,000-unit threshold for the first time since October but are still below the same month sales for last year.
 
There were 1,075 residential sales in February with 2,667 listings added to the MLS®. The sales-to-listing ratio was 40% and there were 7,097 homes in the inventory on February 28th. The average price of a single family home in February was $347,309—down 1.5% as compared to January. Condo prices were down 4.9% to $226,857 and duplex/rowhouses sold on average for $309,180 (a 3.3% price increase).

Calgary - Alberta
Sales activity of single family Calgary metro homes was 825 in the month of February 2009 showing an increase of 50% from 550 sales in January 2009, according to figures released by the Calgary Real Estate Board (CREB®). This was a decrease of 34% from February 2008 when single family home sales were 1,252.

The number of condominium sales for the month of February 2009 was 343, an increase of 52% from the 225 condominium transactions recorded in January 2009 and a decrease of 39% from February 2008 when 562 condominiums changed hands.

The average price of a single family Calgary metro home in February 2009 was $415,568, showing an increase of 0.6% from January 2009, when the average price was $413,049 and showing a decrease of 12% from February 2008 when the average price was $471,696. The average price of a Calgary metro condominium was $268,971, showing a 0.7% decrease from January 2009 when the average price was $270,940 and showing a decrease of about 13% over last year, when the average price was $311,812.
 
Surrey, British Columbia
February sales on Fraser Valley’s Multiple Listing Service® (MLS®) experienced a typical ‘early spring’ surge, increasing by 75% in one month from 389 sales in January to 682 last month. However, by historical standards, they continued to reflect sales levels last seen in the mid-1980s, according to the Fraser Valley Real Estate Board.

Sales showed a 48% decrease compared to the 1,308 sales processed in February 2008. The Board also received fewer new listings last month compared to the same month last year – 2,369 compared to the 2,808 new listings received in February 2008 – however, the total number of active listings at 9,594 was still 11% higher than in January and almost 30% higher than the 7,415 active listings available in February 2008.

Housing Price Index (HPI), decreased 10.4% compared to February 2008, however, increased from the previous month for the first time in nine months. The benchmark price was $456,683 in February 2009 compared to $509,958 last year. The average price of Fraser Valley townhouses decreased by 10.5% in one year, going from $330,444 in February 2008 to $295,731 in February 2009, while the average price of apartments decreased by 10% going from $253,351 in February of last year to $228,091 in February 2009.

Regina - Saskatchewan
According to the Association Of Regina REALTORS®, there were 219 residential properties sold inside the city during the month, a 6% decrease from the record high set in 2008 of 232 sales but tying with 2007 as the second highest number in the past ten-year period. For the entire MLS® including all geographic areas, 232 sales were reported, down 21% from 2008’s record high of 294.

For the year-to-date 378 homes have sold in the city, down 17% from 456 recorded in 2008.

The average price of residential properties sold in February inside the city was $231,880—a new monthly high—up 5% from the previous one set last year of $221,814. The average price for the year-to-date was $223,971, another high and up 5% over 2008’s $213,257. There were 521 new listings received during the month, an increase of 39% from 2008’s 375.

Information in this report is collected from the Real Estate Boards operating in each area.

The Vancouver 2010 Winter Olympic dates are February 12 to 28, followed on March 12 to 21 by the Paralympics Winter Games.

Visitors to the Olympics are already starting to organize their trips to British Columbia and many will need to consider accommodation options in Vancouver's surrounding areas such as the Tri-Cities of, Coquitlam, Port Coquitlam and Port Moody.

This area is located at the eastern end of Burrard Inlet, which flows from Vancouver, and is one of the city's fastest growing regions.  Port Moody in particular is an outdoor lover's dream and boasts beautiful mountain and maritime vistas.

Those interested in the beauty of the local wilderness will find Buntzen Lake recreation area open all year round. The lake is surrounded by forest-covered mountains, which contain many well-maintained hikes of varying difficulty.

Port Moody is also the self-described "City of the Arts" and has numerous galleries and arts facilities, as well as a diverse mix of restaurants, cafes, boutiques and markets. It is a vibrant community with great shopping and dining, and several spas and wellness centres in the historic Moody Centre and the modern Newport Village.

Visitors seeking the convenience of indoor shopping will find over 200 stores at the nearby Coquitlam Centre mall.

The Tri-Cities' artistic talents are on show at the dozen or so local art galleries; the Port Moody Civic Centre, which hosts live artistic performances, special events and theatre; and at the Port Moody Arts Centre, which has four galleries and a gift shop.

Ski/snowboard buffs should visit the North Shore Mountains' excellent ski facilities. Mount Seymour, Grouse Mountain and Cypress Mountain, the latter which will host freestyle skiing and snowboard during the 2010 Olympic Winter Games, are located less than an hour's drive from the Tri-Cities.

Port Moody is 23 km (14.5 mi) from Vancouver, and 140 km (87 mi), or approximately 2 hours from Whistler. For more Metro Vancouver details visit www.2010DestinationPlanner.com.

Call it the petroleum industry’s Christmas gift to the world.

The collapse in crude prices is causing a lot of financial misery in Alberta and every other oil-producing region. But the benefit to energy consumers — individual and corporate — is huge. This massive reduction in energy costs will be a major contributor to recovery from the global economic recession.

The problems created by moribund oil prices are reported daily. Oilsands projects cancelled or postponed. Layoffs in the oil-fields and head offices. The Alberta government will go from massive surpluses to deficits. Hundreds of billions of wealth in the form of oil company shares and real estate values vapourized. Many oil and gas developers and their myriad of support companies will disappear this year.

But the enormity and impact of the savings to everyone who consumes hydrocarbon fuel must be calculated to be appreciated. The current economic mess is being blamed on a credit bubble and U. S. subprime mortgages. The real villain is high oil prices, meaning that substantially lower energy costs should accelerate a turnaround.

The world produces and consumes about 87 million barrels of oil daily. The price is down from $147 in July to about $37, a reduction of $110 a barrel. Those purchasing petroleum and its byproducts are paying $9.6 billion per day less than six months ago.

Annualized, this will save the world about $3.5 trillion per year.

This is a huge number, greater than the gross domestic product of every country in the world except the United States and Japan.

According to Washington’s Department of Energy, the United States burns one billion litres of gasoline and 492 million litres of diesel fuel each day. The cost is down about $2.50 per gallon ($0.66 per litre) from its peak last summer. Using an average reduction of $2 per gallon, this will leave Americans $300 billion richer each year.

For incoming president-elect Barack Obama, this is a financial stimulus gift from heaven. The economy enjoys a massive cash injection and the federal government doesn’t borrow a nickel.

The fuel cost savings in Canada are also enormous. According to the Canadian Association of Petroleum Producers, in 2007 we purchased nearly 34 billion litres of gasoline and 28 million litres of diesel fuel. At an average cost reduction of $0.60 per litre, Canadians will save $42 billion annually. No federal political party –or coalition of left-leaning politicians–would dream of a deficit-funded, federal economic aid package of this magnitude.

There are other, indirect financial benefits of the oil price collapse.

The significant accumulation of wealth by oil-producing countries has created a new class of petro-bullies; governments with enough extra cash to be able to make trouble well beyond their borders. Russia, Iran and Venezuela are but three. Having these countries focused on domestic problems will reduce western defence spending.

Russia is largest and most influential, so its readjustment is the best reported. Foreign currency reserves are being used to support the ruble to prevent further erosion of the wealth of ordinary Russians. The state is also bailing out the infamous oligarchs who, not surprisingly, accumulated a lot of their wealth with borrowed money. Levies have been placed on imported cars to protect a pathetic domestic auto industry. More store shelves are going empty.

Russia’s recent economic success and its attempts to re-establish itself as a global military superpower have been bankrolled by high oil prices. How the mighty have fallen.

As the price of oil rose for six straight years, analysts have wondered when the increased cost would finally result in recession, reduced demand and collapsed prices. This has been the pattern for 35 years.

It was perplexing to many how oil prices and demand could both rise simultaneously. Noted CIBC economist Jeff Rubin was one of the few who blamed the current financial mess on the relentless rise in the price of petroleum.

The credit bubble also came into play. As consumers endured lower disposable income because of rising energy costs, they could borrow their way out of it with home equity loans or another credit card. Finally, the combination of record high oil prices and record household debt reached the point of no return.

No wonder everything fell so hard, so fast and so far.

Alberta’s unhappiness will be a significant contributor to the financial recovery of the rest of the world.

If high prices caused the problem, low prices should fix it. It’s comforting that there’s some good news out there somewhere