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.
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."