Tony Wong – Yourhome​.ca

It’s going to be a busy win­ter for James Bazely.

The devel­oper expects to be build­ing homes and pour­ing con­crete through­out the win­ter in an effort to beat the new Har­mo­nized Sales Tax, which goes into effect next July.

“We’ve had a lot of cus­tomers sit­ting on the fence, but because of the tax they’re much more will­ing to seal the deal,” says Bazely, owner of Barrie-based Gre­gor Homes and pres­i­dent of the Ontario Home Builders’ Association.

“We’ve ramped up pro­duc­tion so we can close on our homes before the HST takes effect next year.”

Bazely says he recently talked to his trades and sup­pli­ers to ensure they are ready for winter.

“Every week we lose, we get closer to that July deadline.”

The new tax, which com­bines the PST and the GST, will have an impact on homes worth more than $400,000.

It would add, for exam­ple, $6,000 on a $500,000 home – enough money to upgrade to a bet­ter kitchen or floors, and a good incen­tive to close early for many consumers.

A $1 mil­lion dol­lar home gets hit with $36,000 in extra taxes.

Fears of the impact of the HST and con­tin­ued low inter­est rates have been enough to jump-start the mori­bund new homes market.

New Home Builders Try To Beat HST

Ontario hous­ing starts rose to the high­est level since March, accord­ing to fig­ures released by the Canada Mort­gage and Hous­ing Corp. Monday.

Starts hit a sea­son­ally adjusted and annu­al­ized 55,700 in Octo­ber, up 14.8 per cent from 48,500 units in September.

“Cana­dian res­i­den­tial con­struc­tion activ­ity has rebounded smartly from the depths of reces­sion seen ear­lier this year,” says BMO Cap­i­tal Mar­kets econ­o­mist Robert Kavcic.

Hous­ing starts in the Toronto area also did well, up 13 per cent in Octo­ber and ris­ing for the third con­sec­u­tive month to 34,200 annu­al­ized units.

“I think we’ve overused the term ‘con­sumer con­fi­dence,’ but it really does apply here. Con­sumers are much more con­fi­dent,” said Bazely. “But it remains to be seen what will hap­pen next year.”

Builders are wor­ried that the impo­si­tion of the HST next year will impact what is seen as a frag­ile recov­ery in the mar­ket. The ren­o­va­tion side of the indus­try is seen as being par­tic­u­larly vulnerable.

“There is a worry that the extra 8 per cent tax will force a lot of ren­o­va­tions under­ground and con­sumers will sim­ply pay cash, espe­cially when the ren­o­va­tion tax credit expires next year,” says Bazely.

The builders’ asso­ci­a­tion is push­ing for a per­ma­nent ren­o­va­tion rebate.

The pop­u­lar ren­o­va­tion tax credit gives back 15 per cent on expen­di­tures between $1,000 and $10,000. It expires next February.

The ren­o­va­tion indus­try is huge, worth about $39 bil­lion in 2008, or about dou­ble that of all the trans­ac­tions in the resale homes market.

Nation­ally, hous­ing starts rose by 5.4 per cent to 157,300 annu­al­ized units, putting Cana­dian con­struc­tion at the best level since the end of last year.

“This report adds to the grow­ing list of indi­ca­tors point­ing to a recov­ery in the Cana­dian hous­ing mar­ket,” said TD Secu­ri­ties eco­nom­ics strate­gist Mil­lan Mul­raine. “With home pur­chas­ing con­tin­u­ing to rise, given the rel­a­tively cheap bor­row­ing rate and favourable buy­ing con­di­tions, we expect the recov­ery in res­i­den­tial con­struc­tion to remain on track in the com­ing months.”

The strongest gains were in provinces that were hard-hit by the reces­sion, includ­ing Alberta, British Colum­bia and Ontario. How­ever, despite the improve­ment, activ­ity is still run­ning below the peak of 2007. But demand is still caus­ing prices to rise.

“The data are now start­ing to look more like a hous­ing boom rather than merely a rebound,” said Bank of Amer­ica Mer­rill Lynch econ­o­mist Sheryl King. “We expect that prices in both the new and resale mar­kets will con­tinue to press higher.”

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