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Winnipeg Free Press - PRINT EDITION

Tax bursts housing demand

Harmonized tax hurts B.C., Ontario

By: Sunny Freeman

Posted: 08/17/2010 1:00 AM | Comments: 0 (including replies)

TORONTO -- A new tax regime in Canada's two busiest housing markets caused demand for homes in British Columbia and Ontario to dry up in July, driving a 30 per cent decline in national sales activity from a year ago.

Canadian home sales were down 6.8 per cent from June, continuing a months-long cooling trend in Canada's real estate sector, the Canadian Real Estate Association reported Monday.

But Manitoba's housing market is avoiding the worst of the chill and has fared better than most of the provinces in many of CREA's metrics, with June to July unit sales flat in the province -- the second best provincial result.

The year-over-year average home price in Manitoba was up 9.4 per cent in July, second highest in the country where the average increase was only one per cent nationally.

July's seasonally adjusted new listings were up 6.4 per cent in Manitoba, the highest in the country. New listings were down 7.2 per cent nationally.

In Manitoba, the dollar volume of home sales in July was down only slightly from June, a mark bettered by only three other provinces whereas nationally it was down seven per cent.

About 85 per cent of July's decline can be traced to fewer sales in B.C. and Ontario -- which generally account for more than half of national sales -- as the new harmonized sales tax prompted many buyers to push sales into the first half of the year, CREA said.

"The soft sales figures we're seeing right now can be attributed in part to accelerated home purchases earlier in the year," said CREA president Georges Pahud.

Activity so far this year is up 5.6 per cent compared with the first seven months of last year, but the gap is expected to shrink as the year progresses because sales ramped up heavily during the latter part of 2009.

Sales peaked in December 2009 and hovered near record levels during the first quarter of this year as buyers rushed into the housing market ahead of changes to mortgage rules, interest rate hikes and the HST.

But sales have dropped in six of the last seven months and were down 25 per cent in the past three months alone, said BMO economist Douglas Porter.

"We (and many others) were consistently warning of a significant second-half slowdown in housing activity but, if anything, the cooling looks even a bit chillier than expected," he wrote in a report.

B.C. had the biggest drop at 14.1 per cent, followed by Ontario with an eight per cent decline.

-- The Canadian Press, with staff files

Republished from the Winnipeg Free Press print edition August 17, 2010 B3

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