Harmonized Sales Tax

On July 23, 2009, Premier Gordon Campbell and Finance Minister Colin Hansen announced that, effective July 1, 2010, BC will adopt a Harmonized Sales Tax (HST), combining the seven per cent Provincial Sales Tax (PST) with the five per cent federal Goods and Services Tax (GST) for a single sales tax rate of 12 per cent.
An additional seven per cent tax will be charged on a variety of real estate related services, including commissions, appraisals and other services that are currently exempt, as well as adding thousands of dollars in additional costs to new home purchases.

Looking to offset the increase in costs, the Government of BC plans to offer a partial rebate of the provincial portion of the HST for new housing to ensure that new homes up to $400,000 will bear no more tax than under the current PST system, while homes above $400,000 will receive a flat rebate of about $20,000.
What does this mean for REALTORS®?

As proposed, the HST will increase the cost of buying or selling a home and becomes essentially an additional tax on home ownership. Under the HST, REALTOR® commissions will be subject to a 12 per cent tax, replacing the five per cent GST now charged.
New home sales over $400,000 will be dramatically impacted, as buyers will now have to pay an additional seven per cent tax (even with the $20,000 flat rebate). This will act as a disincentive to buyers of new homes in the short term.

Source: The British Columbia Real Estate Association, July 27th, 2009 email

Canadian housing prices rose in May by 0.7 per cent

Canadian housing prices rose in May by 0.7 per cent — the first time since October that they didn't decline month-over-month, according to a national index released Wednesday.

However, May's increase was not enough to stop the downward trend in year-over-year prices. The Teranet-National Bank home price index fell 6.9 per cent compared to May, 2008, the sixth straight 12-month decline, and a jump from the 6.7 per cent year-over-year drop posted in April.

The index is now down 8.9 per cent from its peak in August, 2008, said Marc Pinsonneault, senior economist with the National Bank Financial Group.
"This series is not seasonally adjusted (due to the short data span), but a quick back-of-the-envelope calculation suggests that prices may have risen by a more modest 0.2 per cent month-over-month if historical patterns were to be considered," cautioned senior TD Securities economist Millan Mulraine in a note, though he saw some reason for optimism.

"On the whole, this report does offer some hope that the correction in Canadian home prices may be nearing an end, further corroborating the other housing sector indicators that are conveying a similar message," Mulraine said.

Prices fell for the 11th straight month in Calgary and Vancouver. The other four cities included in the index all registered monthly increases — 1.3 per cent in Halifax, 1.5 per cent in Montreal, 0.7 per cent in Ottawa and two per cent Toronto — though prices in Ottawa and Toronto were down on a year-to-year basis. It was the third monthly rise in a row for Halifax and Montreal.

Vancouver prices were down 11.8 per cent from May, 2008 — a decline of 12 per cent from that city's June, 2008 peak — while Calgary's fell 12.2 per cent and are now down 15.2 per cent from their peak in August 2007.

May house prices (% change month-over-month/year-over-year):
National +0.7 / -6.9
Calgary -2.2 / -12.2
Halifax +1.3 / + 1.0
Montreal +1.5 / +2.3
Ottawa +0.7 / -0.6
Toronto +2.0 / -6.5
Vancouver -0.1 / -11.8

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THE RECESSION IS OVER...

The recession is over, the Bank of Canada said in its quarterly Monetary Policy Report released Thursday.

After shrinking since the last quarter of 2008, the Canadian economy will grow by an annualized rate of 1.3 per cent in the current quarter, the bank said.
"We are on track for the recovery both in Canada and globally," Bank of Canada governor Mark Carney told reporters.

However, unemployment will continue to rise, he said.
The return to growth after three quarters of decline signals the end of the recession, defined as two consecutive quarters of shrinkage.

Growth will accelerate through late 2009 and by the first half of 2010, the Canadian economy will be booming along with four per cent growth. But that will begin to taper off to less than three per cent by the last half of 2011, the bank said.
Carney said consumer spending and housing are pulling the growth, especially in the U.S. But there is a "speed limit" to that kind of growth, and the economy will hit it after the burst in 2010, he warned.

The bank said in its report that "stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth."
"However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth."
The outlook is not much changed from its April report, although it says "the growth profile is slightly altered by a faster rebound in domestic demand."

The bank projects that real gross domestic product, a measure of the economy, will fall 2.3 per cent this year, then grow three per cent in 2010 and 3.5 per cent in 2011.

However, the economy will not reach capacity, when supply and demand are in balance, until 2010.
Carney said the prospect of "extreme financial risk from beyond our borders" is no longer an issue, but the recovery is not certain.
Inflation, which has fallen with energy prices, will not increase to the target rate of about two per cent until the second quarter of 2011.

But "significant upside and downside risks remain to the inflation projection," particularly from the volatile loonie, the bank said.
The bank will set policy to ensure the infaltion target is met, Carney said.

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Canada Keeps Rate at current levels

The Bank of Canada kept its benchmark interest rate at a record low, and said the stronger Canadian dollar is slowing a recovery that has been quicker than policy makers expected.

All 23 economists surveyed by Bloomberg News predicted Governor Mark Carney would keep the target rate for overnight loans between commercial banks at 0.25 percent. The central bank also reiterated a plan to keep that rate unchanged through June 2010, and made no comment on further credit-market stimulus.

“Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth,” the Bank of Canada said in a statement today. “However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth.”

The bank now expects the economy to shrink by 2.3 percent, less than the April forecast for a 3 percent contraction. Recent figures signal the economy has already started growing again, the bank said. The bank also said inflation will return to its 2 percent target three months sooner than earlier projected, and that the global economy shows signs of a “nascent” recovery.

“Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010,” the Bank of Canada said. Consumer prices will climb by 2 percent in the second quarter of 2011, instead of the earlier prediction that would happen in the third quarter of that year.

The Canadian currency advanced 0.5 percent to C$1.1002 per U.S. dollar at 9:02 a.m. in Toronto, from C$1.1062 yesterday.

‘Still Serious Recession’

“We haven’t shaken off the shackles of the recession yet, so it’s a little bit early to send the all-clear signal,” Doug Porter, deputy chief economist with BMO Capital Markets in Toronto, said before the report. “This is still a very serious recession.”

At the last rate decision June 4, policy makers said the stronger currency could “fully offset” signs of a recovery after the Canadian dollar saw its biggest monthly gain in more than 50 years in May. Yesterday, it traded near the level where the bank noted its concern.

The stronger currency makes Canada’s factory goods less competitive, in a year where the bankruptcies of General Motors Corp. and Chrysler Group LLC shut Canadian plants, dealers and parts suppliers. Factory sales have dropped by 29 percent since last July, and manufacturers fired 221,500 workers in the 12 months through June, an 11 percent drop.

Exports will fall 21 percent this year, the government’s export financing agency said July 9.

‘Glass of Wine’

“There is still some skepticism in the consumers,” said William Lane, chief financial officer at Imvescor Inc. in Moncton, New Brunswick, which operates restaurant chains including Baton Rouge and Mikes. “Our customers keep coming, but maybe they decide to have a glass of wine instead of a bottle.”

There have been signs this month the Canadian economy is picking up. Reports showed employment fell by less than economists expected, and the economy posted larger-than-expected gains in building permits, business spending and housing starts.

Canada’s economy will grow 3 percent next year and 3.5 percent in 2011, the central bank said. The old predictions were 2.5 percent and 4.7 percent, respectively.

There was no direct mention today of any plan to use so- called quantitative easing, where the central bank creates new dollars and purchases assets to try to encourage new lending.

“The Bank retains considerable flexibility in the conduct of monetary policy at low interest rates,” the statement said.

The central bank separately announced it is reducing the size of its three programs of temporary purchases of securities from major bond market dealers and other investors to ease credit markets. Bond dealers declined to take up all of the central bank’s liquidity offerings for the first time in 43 regular term PRA auctions last week, a sign that conditions in credit markets are easing.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

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Thank you
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Canadian business sentiment has soared.

Canadian business sentiment has soared as bosses across the country prepare for a pick-up in economic activity, sales and employment amid better credit conditions, according to two Bank of Canada surveys released Monday.

The results of the central bank’s Summer Business Outlook Survey are a dramatic change in mood from the Winter and Spring reports, with 61% of businesses expecting sales to rise in the coming 12 months -- the highest reading since records began in 1998.

The expected rise is a welcome change for recession-weary companies, but it is important to note any increases will be off the back of a record drop in sales and, therefore, the outlook does not indicate a return to full health. As Douglas Porter, an economist at BMO Capital Markets, puts it: "[Sales] had nowhere to go but up."
The survey showed a record 69% of businesses recorded a drop in sales in the 12 months prior to the survey, which was taken between May 25 and June 18. Indeed, Bank of Canada commentary was cautious.

"Firms expect their activity to recover only gradually, and they continue to be cautious regarding investment," the survey of about 100 businesses found.
Such sentiment is in line with a report by the Conference Board of Canada on Monday that predicted a slow economic recovery.

The Conference Board said the recession will end in the second half of this year, but the effects of the global recession will linger well into 2010.
"The current recession is so widespread that its effects are expected to linger for longer than the typical business cycle," said Pedro Antunes, director of national and provincial forecast at the Conference Board. "The global recovery will be soft, and Canada is not expected to achieve economic growth significantly above its potential until at least 2011."

The Conference Board predicted gross domestic product will fall by 1.9% in 2009 and rise by 2.7% in 2010, a level weaker than historical post-recession growth levels.
Nevertheless, conditions are moving in a postivie direction. The central bank survey showed hiring intentions had improved in all sectors and 39% of firms now expected to increase employment over the next 12 months, compared with 25% in the Spring survey. Fewer firms had problems obtaining credit, although overall credit conditions remain tight.

This finding was echoed by the Bank of Canada’s Senior Loan Officer Survey, a separate report released Monday, that showed that business-lending practices of major Canadian financial institutions continued to tighten, although to a lesser extent than in Spring.

In a clear signal that credit conditions continue to improve, the Bank of Canada found demand for its term purchase and resale agreement facility -- an initiative put in place to ease liquidity pressures on financial institutions by buying securities from dealers -- was down for the first time since September last year. The central bank purchased just $2.25-billion worth of securities out of a planned $3-billion.

Derek Holt, the vice president of economics at Scotia Capital warned that businesses may not maintain such a high level of optimism by the time the Bank of Canada’s Autumn survey approaches. He said commodity prices, stock markets and the Canadian dollar had all eased since the survey was taken.

Interest rates also hold the potential to shake up expectations. The Bank of Canada has committed to keeping interest rates on hold through to mid-2010. But Marco Lettieri, an economist at National Bank Financial said the bank may be forced to raise interest rates sooner if inflation rises. He said core inflation at 2% was higher than the central bank had forecast and that service sector price inflation would need to ease along with a further softening in the Canadian to prevent a rise.
For the moment, businesses intentions do not reflect a surge in prices. The number of businesses that expected input and output prices to increase at a faster pace in the coming 12 months inched higher in the central bank’s summer survey, although the vast majority continued to foresee a slow pace of growth.

“Article Sources from: By Alia McMullen, Financial Post July 13, 2009 3:30pm”

Housing market surging in Vancouver

VANCOUVER — A new report suggests that a housing recovery is underway in key Canadian markets, with the Greater Vancouver area and Toronto leading the way.

“Growing consumer confidence levels have prompted a serious upswing in home buying activity in the Greater Vancouver Area, with sales in June (4,259, up 75.6 per cent from the same time last year) the second highest on record for the local real estate board,” according to the RE/MAX Market Recovery Report, which was released Monday.
“From White Rock to Vancouver, radiating out to the Fraser Valley, bidding wars are breaking out on well-priced product. In Kitsilano, an estimated 50 per cent of housing is selling in multiple offers.”

The report maintains that pent-up demand has bolstered sales in Greater Vancouver and that the 2010 Olympics and the completion of the Canada Line will further push demand. “Home buying activity, as a result, is forecast to continue at a healthy pace for the remainder of the year, with year-end sales slightly ahead of 2008 levels,” the report said.

Elton Ash, regional executive vice president, RE/MAX of Western Canada, said in a statement that there are other signs that a recovery is underway. “Renewed consumer confidence, albeit cautious, has been key, supported by improved economic news. In addition, we’ve seen sale price-to-list price ratios climb across the country, rising as high as 105 per cent in some communities. Vendor incentives have also come off the table, both for resale and new housing stock.”

According to the report, the surge in resale activity can be attributed to three key factors: pent-up demand, low interest rates and greater affordability. “The combination — in conjunction with declining inventory levels — has created heated market conditions in hot pocket neighbourhoods, prompting a resurgence in multiple offers in June. Average prices are holding steady or climbing, days on market are down, and inventory levels continue to tighten, especially at entry-level price points.”

The report stated that while average price is still significantly lower than a year ago, declining inventory levels have been placing greater upward pressure on values.
“First-time buyers are driving freehold housing sales at the $600,000 price point, while those looking at more affordable alternatives are considering condominiums starting at substantially less,” the report said. “Pent-up demand has also been building, with local purchasers and international investors both active in the market.”

(Article Sourced from : By Brian Morton, Vancouver SunJuly 13, 2009)

Building permits top $5-billion on condos

Activity won’t last, analysts say
OTTAWA - The number of building permits issued in Canadian municipalities "soared" in May, but economists warned Monday the flurry of activity won't last.
Statistics Canada said the value of building permits issued in May surpassed the $5-billion mark for the first time since October.

That represents a "whopping" 14.8% hike over April, according to Charmaine Buskas, senior economics strategist with TD Securities.
"This report is at odds with expectations, but can be mostly explained by the massive increases in two main sub components - multi-family units and institutional permits," Ms. Buskas said Monday. "Clearly, builders were not scared off by the weak macro economic backdrop, and in fact were helped by government spending."
However, she also cautioned, "This pace of rising activity is unlikely to continue."
Statistics Canada also attributed the new building activity to increases in the number of permits issued for multi-family dwellings in Ontario and institutional permits in Alberta and Ontario.

Municipalities approved 13,087 new dwellings in May, an increase of 22.1%.
Statistics Canada says that reflects an 40.5% increase, or 7,948 multi-family units. The number of single-family units approved rose 1.5% to 5,139.
"All provinces, except for Nova Scotia, reported increases in multi-family construction intentions," Statistics Canada said. "Intentions nearly doubled in Ontario compared with April."

The new data shows the largest gains were seen in Calgary in all components of the non-residential sector, and in Toronto with increases in multi-family dwelling permits.
By contrast, the total value of permits in Quebec declined in May, after two consecutive monthly increases.
Statistics Canada said the value of permits in the residential sector have increased for three consecutive months.
Residential building intentions rose 14.4% to $2.6-billion, with Ontario accounting for most of the increase.

In the non-residential sector, the value of permits rose 15.3% to $2.4-billion following a 12.9% decrease in April.
The building permits survey covers 2,400 municipalities representing 95% of the population and provides an early indication of projected building activity.

(Article Sourced from: Becky Rynor, Financial Post Published: Tuesday, July 07, 2009)

Market conditions drive strong June housing sales

VANCOUVER, B.C. – July 3, 2009 – The combination of low interest rates and more affordable pricing helped propel Greater Vancouver home sale numbers to the second all-time highest total for the month of June.
The Real Estate Board of Greater Vancouver (REBGV) reports that sales of detached, attached and apartment properties increased 75.6 per cent in June 2009 to 4,259, from the 2,425 sales recorded in June 2008. The figure is just short of the record-breaking 4,333 sales which occurred in June 2005.
New listings for detached, attached and apartment properties declined 17.9 per cent to 5,372 in June 2009 compared to June 2008, when 6,546 new units were listed. However, new listings increased 13.5 per cent from May to June of this year. Total active listings in Greater Vancouver currently sit at 13,252, down 27 per cent from June 2008 and 2.9 per cent below the active listings count at the end of May 2009.
“Price reductions and low interest rates have created an improvement in affordability, which is causing the number of sales to rise to levels comparable to 2003 to 2007,” Scott Russell, REBGV president said.
“Many people who were reluctant to purchase a home last fall and earlier this year are returning to the market because they see conditions that appeal to their personal and financial needs,” Russell said. “However, the current marketplace is such that buyers are more inclined to walk if they don’t like the terms of an offer.”
Residential benchmark prices, as calculated by the MLSLink® Housing Price Index, declined 8.2 per cent to $518,855 in June 2009 compared to June 2008.
The number of sales of detached properties increased 81.6 per cent to 1,667 from the 918 detached sales recorded during the same period in 2008. The benchmark price for detached properties declined 8.4 per cent to $701,384 in June 2009 compared to June 2008.
The number of sales of apartment properties in June 2009 increased 69.3 per cent to 1,790, compared to 1,057 sales in June 2008. The benchmark price of an apartment property declined 8.2 per cent from June 2008 to $356,880.
The number of attached property sales in June 2009 increased 78.2 per cent to 802, compared with the 450 sales in June 2008. The benchmark price of an attached unit declined 7.3 per cent between June 2009 and 2008 to $441,620.
(SOURCE: REBGV Communications)