The Canadian Press: Housing industry says fed budget ignores calls for home affordability

Housing industry says fed budget ignores calls for home affordability

TORONTO — Canadian homebuilders and real estate brokers say the stay-the-course federal budget ignores measures that would make new houses more affordable as real estate prices continue to rise.

This year’s budget did not include any significant measures for the real estate industry, in a sharp contrast to the 2009 budget, which tried to kickstart a slumping industry with measures to make housing more affordable.

That budget raised the amount homebuyers could withdraw from their RRSP to put toward a down payment to $25,000 from $20,000 and introduced a tax credit for first-time homebuyers.

Those incentives survived in Thursday’s budget, but the popular home renovation tax credit introduced last year did not.

Finance Minister Jim Flaherty called Canada’s housing market “healthy and stable” in his budget address.

The Canadian Home Builders’ Association said it was disappointed in Flaherty’s decision against introducing a permanent replacement for the renovation tax credit, which allowed homeowners to save up to $1,350 on qualified renovations of between $1,000 and $10,000.

“A permanent 2.5 per cent GST home renovation tax rebate would restore fairness to how home renovation is impacted by the GST, and also go a long way to combating the massive underground “cash” activity in home renovation”, said its president Gary Friend.

He said the budget also missed the opportunity to implement changes to the GST new housing rebate.

“This is the single most important step the federal government can take to protect housing affordability and choice. What Canadians need now are permanent policies that end the erosion of housing affordability,” he said.

When the GST was introduced in 1991, a full GST rebate applied to homes selling for $350,000 or less, he said, adding that while those homes cost $550,000 today the rebate level has not changed.

The Canadian Real Estate Association, which represents 96,000 real estate agents, also said some affordability measures the trade group had been calling for were left out of the federal budget.

The association’s chief economist Gregory Klump said it had been asking for an expansion of the tax credit offered to first time homebuyers and that it be indexed to inflation, which would have made homes more affordable for all.

He added CREA welcomed the government’s plan to standardize the calculation and disclosure of mortgage pre-payment penalties through regulation to bring clarity for consumers.

But Klump said he didn’t expect any changes to the resale housing market, given that Flaherty introduced new federal mortgage rules that require stricter conditions when Canadians apply for loans.

“We’re satisfied that no further regulatory action needs to be taken,” he said.

Klump added that Canada’s currently hot housing sector reflects normal market activity during a time of economic recovery, adding that it is expected to drop off later this year when the Bank of Canada is widely expected to raise interest rates to fight inflationary pressures in the economy.

Copyright © 2010 The Canadian Press. All rights reserved.

Posted via web from Toronto Real Estate News | Blog

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