HST blamed for housing sales drop

Tuesday, August 17th, 2010

Figures for July worst in B.C. and Ontario

Garry Marr

Housing sales were down 30 per cent in July from a year ago, and the Canadian Real Estate Association is blaming the harmonized sales tax in B.C. and Ontario.

The Ottawa-based group, which represents 100 real-estate boards across the country, said July sales plunged 6.8 per cent on a seasonally adjusted basis from the previous month, a decline “almost entirely the result of fewer sales in British Columbia and Ontario,” where the HST went into effect on July 1.

The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real-estate commission, and not the actual sale price.

Phil Soper, chief executive of Royal LePage Real Estate Services Ltd., said the HST, combined with tougher mortgage rules, expectations of higher interest rates and the bounce back from the recession, drove the market earlier this year.

“You take those four things and add them together and you get a highly front-ended year, which we forecast,” he said.

The housing market did get some good news from Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal, which all lowered interest rates on Monday. The five-year, fixed-rate closed mortgage is down to 5.49 per cent, which means that on a discounted basis, consumers can likely lock in a rate of less than four per cent for five years.

But John Andrew, a professor of real estate at Queen’s University in Kingston, Ont., doubts the cut in bank rates will be enough to reverse a declining housing market.

“With homes sales down 30 per cent, that’s surprising. I was expecting a drop, but nothing that big. I think prices are next [to decline] although they are holding their own now,” Andrew said.

The average price of a home sold in July was $330,351, just a one-percent increase from a year ago. However, the average price of a home sold in June was $342,662, so prices are off 3.6 per cent from a month ago.

CREA said the lack of activity in B.C. and Ontario likely skewed average prices down. In B.C., sales dropped 14.1 per cent from a month ago.

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