Despite warnings, the province’s government is offering incentives for first-time homebuyers
While warnings about a Canadian housing bubble and rising household debt keep piling up, the government of British Columbia appears intent on fuelling the fire. This spring, first-time homebuyers can get a cash-back bonus of up to $10,000 for a newly built home. This “tax relief,” which aims to also “assist the residential construction industry,” will last until 2013. Government stimulus seems like the last thing Vancouver’s market (the priciest in the country) needs. Tina Mak, a broker with Coldwell Banker in Vancouver, knows of at least two condo projects that sold out in a matter of hours earlier this year with prices starting well above $500,000. Robert Kavcic, an economist with BMO, explains the intent of the program is “to ease the transition back into the [provincial sales tax] system.” With the harmonized sales tax, implemented in 2010, taxes for new homes rose from five to 12 per cent. A referendum forced the province to scrap the HST. It will be discontinued next spring. Kavcic thinks the bonus will help the industry through a down year, as people hold off on entering the new home market until taxes drop. Sales will likely go back to normal in 2013, he adds. But Mak expects a buying boom. Her phone has been ringing off the hook with clients interested in the rebate.