I generally steer clear of sweeping statements like this month’s headline. The reason it appears here is that the first 3 months’ results on our North Shore show that those who did sell in this time frame far outperformed those selling in the comparable ‘09 period. Albeit that was an economic low point.
Does this automatically imply that now is therefore a bad time to buy? Only if one believes that market values are turning and will start moving down. This will only happen if buyers collectively retreat from making the decision to buy. I will go out on a limb and say that the demand for “re-housing” will not drop with any significance in the short term. My belief is based on a few factors. Firstly, the fact that multitudes of property seekers have pre-approved mortgages at rates below those seen in the new “rate sheets” of the major lenders.
These mortgages have to be drawn down before their terms expire – anything from 30 – 90 days. Oh, and while on this subject, as I’ve often said, make sure to get a mortgage rate pinned down if you may be a buyer in the short/medium term. Think of it as a “financial prophylactic”.
Secondly, a one-time phenomenon (until the next one-time phenomenon 😉 ) – that of the July 1st introduction of the HST. New construction will generally be impacted. However, owing to the rebate rules (see http://www2.news.gov.bc.ca/news_releases_2009-2013/2009FIN0017-000647.pdf – for those who would like the text of the November 19, 2009 Ministry of Finance statement) which lessen the “increased 7%”, HST on a $500k purchase would not be affected (“purchasers of new homes up to $525,000 pay no more tax due to harmonization”) – a $1mm unit $43,750 [$70,000 – 26,250]; a $2mm unit $113,250 [$140,000 – 26,250]. Remember that the property developer will now be claiming (as an input tax credit) all the 7% (PST portion of the HST) that they have paid in the construction of the units for sale and will thus have a lesser cost of construction equivalent from, say, 40% to 70% of the PST portion (7%) of the tax that they would have passed on to the end purchaser. They now have the flexibility to pass on some or all of this saving in the way of a reduced unit price to the buyer.
Will this double whammy, tax and rate increase, mean the end of local civilization as we know it? Again, an opinion – no. The “Chicken Little” reaction is not called for, although, obviously these incremental economic factors have, at least initially, some effect on prices and activity. Affordability does impact demand and will almost certainly put the brakes on the recent round of housing price inflation.
The tax impact of this collecting of PST on hitherto exempt items, is, in the case of “new” real estate really a “wealth tax” (or in economic parlance a form of progressive taxation) impacting those who can afford the higher priced new dwellings harder than those not able to afford these luxury items.
Overall North Shore demand continues to be strong with inventory, other than townhomes (11 more), lower than 2009.
Again, visit my website to see and “hear” the new developments. I continue my commitment to keep you… www.OnTopOfTheMarket.ca – the “go to” site for North Shore Real Estate analysis and jumping off point for FULL market listing information.
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