Real estate industry seeks jump-start
Wants Ottawa to amend Home Buyer’s Plan to allow broader access to RRSP funds
By Lori Mcleod – Globe and Mail
The real estate industry wants the federal government to bolster the housing market, as it bids goodbye to a bleak 2008 and braces for an even tougher year ahead.
The Canadian Real Estate Association (CREA), a trade organization representing real estate agents, is asking the government to broaden the Home Buyer’s Plan, which allows some home buyers to withdraw RRSP funds for their purchases.
“The government has already moved to help credit markets and our chartered banks, now it’s time to take direct and immediate action to help ordinary Canadians,” said CREA president Calvin Lindberg in a statement.
CREA is asking Ottawa to raise the limit on RRSP withdrawals by first-time home buyers by $5,000, to $25,000, and extend the program to anyone buying a home. In addition to first-time buyers, the withdrawals are now permitted to those buying or building homes for related people with disabilities.
Economists declared the housing boom dead last year, as weakness that started the year before in Alberta spread across the country.
“With job losses accelerating late last year, sales activity will likely remain under pressure, while the imbalance of listings relative to sales should keep prices in correction mode. All told, 2009 is shaping up to be another difficult year in the Canadian housing market,” said Robert Kavcic, economic analyst at BMO Nesbitt Burns Inc.
In a recent report, the Conference Board of Canada said it expects home prices to slide in 2009, a forecast that was in line with economists’ estimates. In context, the average value of a resale home surged nearly 80% in the six-year period ending in 2007. The market for new homes has also been weakening, and both price growth and new building intentions are slowing.
In a measure of how the market is getting tougher, one Vancouver developer has decided to slash prices on inventory that has been selling at a sluggish pace.
The Onni Group said yesterday that it will cut prices by up to 40% on 375 unsold units at seven completed condo developments in the Vancouver area, in a one-day “liquidation” sale that will take place on March 7.
The company decided the financial benefits of selling at reduced prices outweighed holding the units over the longer term, said Chris Evans, executive vice-president at Onni. The developer wants to free up funds to take advantage of opportunities when the market picks up, Mr. Evans added.
Looking for ways to stimulate the economy during the downturn and offset job losses in construction, which totalled 44,000 in December alone, the Harper government has been floating the idea of a tax credit for home renovations in the Jan. 27 budget.
The CREA initiative may face a tough time winning over policy makers. In fact, the Canadian housing market probably doesn’t need the help, said Benjamin Tal, economist at CIBC World Markets Inc.
“Because this is a measured correction rather than a U.S.-style meltdown in the housing market, there is no urgent need to fix it. In an economic recession, we need to allow the housing market to balance itself in order to emerge on a more solid foundation.”
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