Ontario to provide 75 per cent tax rebate on first $400,000

ROBERT BENZIE
QUEEN’S PARK BUREAU CHIEF
Premier Dalton McGuinty’s Liberals are sweetening the pot in a bid to make the controversial harmonized sales tax more palatable to Ontarians.

In a surprise move this morning, the government announced it was capitulating to homebuilders’ demands by effectively reducing taxes proposed on new homes.

Under the change, buyers of new homes in all price ranges would receive a 75 per cent rebate of the 8 per cent provincial portion of the HST on the first $400,000 of the cost.

In the March 26 budget, Finance Minister Dwight Duncan had said that while people purchasing new homes costing less than $400,000 would be eligible for the tax break, those buying more expensive homes would get little relief.

It would have been a recipe for disaster for consumers and developers because there would be a gradual increase in taxes on homes costing between $400,000 and $500,000 and a massive one on those priced above $500,000.

For residents of Greater Toronto, where homes are more expensive than in the rest of Ontario, it would have been especially onerous.

“During these challenging economic times, the McGuinty government’s enhanced housing rebate would improve affordability for more homebuyers – increasing the most generous housing rebate of its kind in Canada,” Duncan, who was not available for comment, said in a news release.

The Liberals also announced a new rebate to encourage builders to construct rental housing units.

The HST, which will blend the 8 per cent provincial sales tax and the 5 per cent federal GST, is to come into effect July 1, 2010.

Since it was announced early this spring, the government has weathered an avalanche of criticism because the business-friendly levy will increase taxes on gasoline, heating fuel, funerals, newspapers, fast-food value meals, legal services and a slew of other things.

A Toronto Star-Nanos Research poll last month found 67 per cent of people polled have a negative view of the melded tax compared to 23 per cent seeing it as positive and 10 per cent unsure.

Here’s the latest update from the Milton real estate market. As you can see in the first chart, the Total Market Annual Summary, the inventory of available homes is slowly tracking downwards. We now have a similar amount of inventory to what was available before the new construction started back in 2001, yet we have 4 times the number of houses. Sales activity is remaining fairly constant, and as the days on market reveals, things are selling quite quickly. 

Here’s the annual update, showing overall activity:

And here’s the Weekly Price Range Summary

As the Weekly Summary by Price Range (above) reveals, activity is spread across the lower ranges. An interesting note is that, with today’s mortgage rates, money has a much stronger buying power, and I think that is partly why the sales over $375,000 are fairly good.

For example, at 3.6%, the monthly payment on a $100,000 mortgage is approximately $505; if rates were 5.5%, that same payment would only get you $81,000 of mortgage. Double those numbers and your $1010 will now get you into a $200,000 mortgage vs a $162,000 mortgage. More realistically, multiply those numbers by 3.5 and your $1,768 will get you a $368,000 mortgage at 3.6% vs a $284,000 mortgage at 5.5%. THIS IS HUGE!!! This difference alone moves you from the mid-range semi-detached homes and the upper-end row houses (townhouses) into the lower-mid-range detached homes. For the same monthly payment. Sure, your taxes will be a touch higher, and the downpayment required a little bit more, but not by a significant amount. 

And here’s the graphical listings and sales information (listings in green; sales in red):

Another installment from Keller Williams Research . . .

Note that the 5.25% rate they refer to is the posted rate; available rates are around 3.5%

Don’t know about the spelling, but that’s the name of a song that was featured in the movie ‘Walk The Line’.

Folks, time’s-a-wastin’ on the opportunities in this market! A few months back, I wrote about how this market is a limited opportunity, sort of like the sales that car dealers have – limited opportunities. We are still in a ‘Perfect Storm’ of a real estate market, a never-before-seen convergence of reduced prices, lower rates than in history, and when it costs more to rent than to buy. It won’t last; it can’t, because as more and more sellers see the activity in the market, then more and more buyers will wake up and smell the roses, and then we’ll be in serious bidding wars again.

You just have to follow the conversations on FaceBook and Twitter, Active Rain and a few other places where Realtors gather, to get the picture of what is happening in the Canadian real estate markets. Scroll down a few posts and look at the charts in ‘This Month In Real Estate Canada’ and you’ll see what is happening.

Here’s a snip from a great post on http://Active Rain.com :

My little sister called me the other day and in an excited voice declared, “I think I might need to look at houses…It’s a GREAT time to buy a house right now, you know!”

After the pregnant pause ensued (the one where my condescending big sister brain struggled with my professional Realtor brain) I finally said, “No? Really? What makes you think that?” (You can tell which brain won out.)

“Well. I have a friend who just got a fantastic deal on a house and I think it might be time for me to think about looking!”

Ok, so which part of what I have been saying for months now did she mis

s? Apparently, the same part that ALOT of buyers are missing…that would be the part that sounds just like Charlie Brown’s teacher talking whenever somebody you aren’t listening to tells you something: Wah, wah, wah, wah…

Read the rest here

I’ve written before about the sort of herd mentality that surrounds buyers – when not a lot of people are buying houses, buyers seem to think the prudent thing to do is wait, because, after all, if it was a great time to buy, wouldn’t everyone be buying? Well, when everyone else is buying, prices go up, bidding wars ensue, and all the buyers lose. If that sort of buying is your preferred style, then I’ll be more than happy to help you. But if getting a great house at a lower price and at historically low interest rates is something that appeals to you, call me TODAY and let’s see if you can get in on this before it’s too late.

I know that a lot of people are worried about their jobs, but it costs less to buy than to rent, so unless you plan on living in your car when you lose your job, that’s really not a reason to wait.

The prize goes to those who take action. The action you need to take is to call me today at 905-208-7002

Canadian Housing Market Firming,
Government Support Remains Strong

While buyers absorb inventory and demand remains intact especially among first-time buyers, industry experts envision a continual shift to a more balanced market in the coming months. Home prices, which firmed in late winter, remained lower compared to last year but are showing clear signs of a potential rebound. With inventory levels still somewhat high, builders are proactively adjusting by slowing new residential construction starts, which now stand at their lowest level of the decade.

Spotlighting an interesting trend in the condo market, research suggests many of Canada’s older baby boomers and younger eco-boomers hold a preference for condos.

The low maintenance and smaller footprint are compelling points for the older generation, while the more affordable prices serve as an entry point for an aspiring younger generation of homeowners.

In a welcome surprise, April’s employment numbers showed an unexpected addition of nearly 36,000 new jobs compared to the anticipated loss of 50,000.

While this news is encouraging, the potential for future weakening in the labour market still poses a risk to overall housing demand.

Canada’s government remains firmly focused on supporting the housing market. The Bank of Canada cut the overnight rate to a record low and has made a commitment to keep rates at this level until mid next year. A commitment of this nature is unprecedented among central banks.

The Numbers That Drive Real Estate

1. Sales
2. Prices
3. Inventory
4. Mortgage Rates

According to the most recent data, existing home sales increased for the second month in a row. Home sales increased 7%, which built on the 10% gain the month before. The number of sold transactions now stands 18% above levels reported in January, when activity fell to the lowest level in a decade.

The monthly increases in activity were the most significant in British Columbia and Ontario. Sales were also up in the Northwest Territories, Manitoba, Quebec, and Newfoundland and Labrador.

Buyers are starting to take notice of lower prices, interest rates, and rising affordability conditions.

Average Home Price (in Thousands)

The pace of home price declines is tapering which is providing some glimmer of stabilization in the housing market. Home prices increased 2% from the previous month but is down 8% from the same time last year, which is the smallest year-over-year decline in six months.

The average home price currently stands at $288,641. The national average price continues to be skewed downward by lower activity in Canada’s more expensive housing markets, i.e., British Columbia, Alberta and Ontario which accounts for 67% of national activity. 7 out of 12 provinces and territories actually saw price increases.

Home Prices by Province
7 out of 12 Saw Increases

Inventory (Sales to Listing Ratio)

Market conditions moved toward balanced conditions due to increase in demand and fewer new listings. In the first quarter of 2009, there were 6% less homes entering the market compared to the previous quarter, which represents three consecutive quarters of declines in new listings.

Mortgage Rates

Average for: 25-Year Amortization,5-Year Term

Bank of Canada lowered its overnight lending rate to the lowest rate on record. As a result, mortgage rates decreased to 5.25% last month. Mortgage rates were 1.7 percentage points lower than the same time last year.

Recent Government Action

Bank of Canada Makes Historically Unprecedented Move

In an effort to stimulate the economy, the Bank of Canada has come to yet another historic cut in its interest rate policy on April 21. The Bank cut the overnight rate from .5 to .25%. This rate cut mostly influences traditional lending institutions but should also impact pricing in open markets as well.

The Bank has committed to keep rates as is until mid-2010. No known central bank has ever committed to anything of this nature, illustrating the Bank’s firm commitment to supporting the economy.