Published January 15, 2009 CREA
The Canadian Real Estate Association is calling on the federal government to include several housing initiatives in the upcoming budget. The association believes the proposals are even more important in today’s recessionary times, based on the impact housing has on the overall economy and the reported results of MLS® residential sales in 2008. “Bay Street needs to take a back seat to Main Street in the next federal budget,” says the President of The Canadian Real Estate Association, Calvin Lindberg. “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.” Statistics released today by the CREA show that the residential housing market sales volume withdrew in 2008 to levels not seen since 2002. More importantly, the most recent statistics from December 2008 show that sales activity reached its lowest level for the month of December since 2000. Some 434,477 homes traded hands via the MLS® systems of real estate boards in Canada in 2008, down 17.1 per cent from the record 523,855 properties sold in 2007. “We are pleased the Minister of Finance and the government have recognized the need for action by ranking housing as one of the top six issues in its pre-budget consultations,” Mr. Lindberg added. CREA has met with senior government officials and proposed several measures to help stimulate the housing market, both for residential and commercial investors. For residential homebuyers, CREA proposes the government increase the limit of the Home Buyers Plan (HPB). Introduced in 1992 by a Conservative government and made permanent by a Liberal government in 1994, the HPB has broad political and consumer support. The HBP allows first time homebuyers to withdraw up to $20,000 from their RRSP to help purchase a residential property, which must be repaid over a period of 15 years. Unfortunately, the HBP has not kept pace with inflation or home prices. As a result, the HPB does not have the same impact and relevance it did 16 years ago, when $20,000 represented 13.3 per cent of the average house price, versus about 6.5 per cent today. “The government should immediately raise the HBP limit from $20,000 to $25,000 and it should keep pace with annual inflation. Additionally, it should be available to all home buyers, not just first time buyers,” the CREA President added. To address issues facing the commercial and investment property markets, CREA is seeking amendments to the Income Tax Act to promote increased reinvestment in real property. The CREA proposal calls for the deferral of capital gains taxes and the capital cost allowance recovery for all real property investments when an investment property is sold and the proceeds are re-invested in another real property within the subsequent year. “Our proposal has benefits across the board for the economy, for rental housing and for the small investor, as well as some significant environmental benefits as old buildings are renovated and made more energy efficient. The budget is the perfect time for this sort of stimulus,” Calvin Lindberg added. Studies show that more than 29 jobs are created for every $1 million invested in property renovation. A study prepared by Altus Clayton for CREA also shows that each residential MLS® transaction generated an additional $32,200 in consumer spending. Commercial and investment property transactions can generate even higher levels of economic spinoffs. Canada Mortgage and Housing Corporation (CMHC) reported that rental construction is not growing fast enough to offset demand. At the same time, the Ontario Housing Supply Working Group has found that tax changes, such as the proposed rollover, “will not only lower the rent threshold at which a new project will be viable…new supply will help reduce demand pressures and…increase the supply of vacant units in existing stock.” CREA’s proposed deferral and reinvestment will help the small investor disproportionately. Research based on the 2006 tax year indicates that 58 per cent of those reporting real property gains had net incomes of $50,000 or lower. CREA’s detailed proposal for the Home Buyers Plan is available on www.crea.ca. CREA’s capital gains proposal is also posted on www.crea.ca. A podcast with CREA President Calvin Lindberg is also available on www.crea.ca.