New Tax Credit for First-time Home Buyers will Stimulate Market
This article appeared in the Vancouver Sun on February 21st, 2012 and was written by Brian Morton. This tax credit will also benefit Kamloops as there is always a lot of new construction in our city. This will at the least help mitigate the HST expense on new homes for Kamloops buyers. Read article below.
A new tax break for first-time buyers of new homes will help stimulate the construction industry and create plenty of new jobs, an industry executive said of Tuesday’s 2012 provincial budget.
“This is welcome,” Greater Vancouver Home Builders’ Association president and chief executive officer Peter Simpson said of a temporary bonus for first-time homebuyers that will be effective until March 31, 2013, and is worth up to $10,000.
“They have a difficult time getting into the market and typically get assistance from the bank of Mom and Dad. So this helps property virgins get on the first rung of home ownership and helps stimulate construction.
“For every home start, there are approximately three full-time jobs each year.”
The bonus, a one-time refundable personal tax credit, is equal to five per cent of the purchase price of the home to a maximum of $10,000.
The bonus will be reduced based on a buyer’s or couple’s net income. For single people, the bonus is reduced by 20 cents for every dollar in net income over $150,000 (it’s reduced to zero at $200,000 net income). For couples, the bonus is reduced by 10 cents for every dollar in family net income over $150,000 (it’s zero at $250,000 family net income).
The bonus, which includes detached houses, duplexes, townhouses, condos, mobile homes, floating homes and cooperative housing units, is based on homes where the HST is now payable.
In a budget briefing, Finance Minister Kevin Falcon said the incentive will help people get into the market.
“We hear from people that talk about the challenge their children or their grandchildren are having getting into their first home,” Falcon said.
“And the biggest hurdle is usually the down payment you’re required to come up with. We believe a $10,000 contribution towards those first-time purchasers of new homes is a great contribution, a great way we can help your children or your grandchildren get into their first home and at the same time receive the dual benefit of supporting the new home construction industry over the next 12 months when it’s forecast across the country to be slowing.”
Urban Development Institute executive-director Maureen Enser agreed, saying the homebuyer bonus was an added bit of good news for the home construction industry on top of the government’s announcement last week raising the HST-rebate threshold to $850,000.
“In the Lower Mainland in particular, where housing is very expensive, both measures together make it easier for people to consider a new home [purchase] for a family,” Enser said.
She added that the maximum $10,000 bonus for first-time buyers with net income under $150,000 should stimulate some potential buyers to move off the sidelines and look for homes, particularly in the Lower Mainland.
“[About] 13 per cent of new housing is priced below $525,000, and 50 per cent is between the $525,000 and $850,000 range,” Enser said, so the measures combined help bring down the cost of new housing at both ends.
However, Simpson was less happy about the budget’s lack of any significant tax relief for the home renovation industry, noting that B.C. homeowners will spend more than $7.6 billion in home renovation, improvement and repair this year.
“We’re still left with the issue of the underground economy, with people delaying their decision to renovate their home by waiting for the HST to disappear [on April 1, 2013],” said Simpson, who added that the home renovation tax credit of up to $1,000 a year for seniors to help them remain in their homes longer will not have a big impact on renovators.
Vancouver-based home renovator Todd Senft agreed with Simpson, saying he’d hoped for new relief but now believes the lack of tax breaks in Tuesday’s budget will force many people to put off renovations and go to the underground economy — where renovators with less credentials undercut legitimate contractors.
“That’s disappointing,” Senft, owner of reVISION Custom Home Renovations Inc., said.
“I’m glad they paid attention to new-home builders, but that doesn’t help us. People will wait a few months and save a few thousand dollars.
“It [the home renovation industry] is steady right now and the year has started moderately. But it will be a tough grind this year. I’m hoping more [homeowners] don’t head to the underground economy to save money. The savings by doing it under the table are massive.”
Meanwhile, Business Council of B.C. president Jock Finlayson said the 2012 budget is generally very positive for B.C.’s economy.
“We would give it high marks overall. It’s not perfect, but we think it will be well received in the business community and financial markets. [And] it reinforces the province’s strong fiscal position and aims to [return B.C.] to a balanced operating budget. It maintains most of the tax advantages of B.C.
“And the forecasts are credible, as we see it.”
However, B.C. Federation of Labour president Jim Sinclair called the budget a continuation of policies that have put more money in the pockets of the richest British Columbians and B.C. Liberal insiders at the expense of working and middle-class families.
“British Columbians have a right to ask why in tough times we’re giving grants to CEOs to buy vacation homes in Whistler, while they’re telling health care workers and teachers that they have to take a pay cut. I think this is a poor excuse by a desperate government to try to capture the right wing.”
Sinclair said the budget speech acknowledged that front-line workers in B.C.’s public sector had already foregone billions in income due to real wage cuts over the past two years, while cabinet ministers and senior managers got double-digit pay hikes. “It’s simply not fair.”
Iain Black, president and CEO of the Vancouver Board of Trade, said his overall grade for the budget is a B. “We’re dealing with a government with very difficult global economic conditions to deal with and yet it managed to carve out some careful, strategic moves for B.C.”
Kevin Evans, CEO of the Industry Training Authority, also praised the budget for providing tax credits for the shipbuilding and ship repair industry to help employers hire apprentices.
Shachi Kurl, director of provincial affairs, B.C. and Yukon, for the Canadian Federation of Independent Business, said the budget appears to be on track to balance the budget by next year, but raises the unwelcome spectre of corporate tax increases and fails to honour the commitment to eliminate the small business tax rate.
Deloitte tax policy expert Lisa Zajko said the retention of the 2.5-per-cent small business rate and the provisional one-precentage point increase to the corporate tax rate — from 10 per cent to 11 per cent effective April 1, 2014, if the economy falters — are not surprising. “The wait-and-see approach to the corporate tax rate increase is a safe move but may affect B.C.’s competitive position in the future if Alberta and Ontario keep their rate at 10 per cent, without entirely foregoing the prior work toward cutting corporate tax rates.”