HST Resonsible for Slowing the BC Real Estate Market in July 2010?

Real estate sales figures from British Columbia and Ontario have shown marked declines since the introduction of the HST in both provinces on July 1, 2010.

A recent survey conducted by Royal LePage Real Estate Services poled 765 realtors online at the end of July 2010 and found that 44% of those poled in BC and Ontario said that the introduction of the HST is having the greatest effect on the cooling residential real estate market in those provinces.

Coincidentally, just 28.4% of those poled cited rising interest rates as having the greatest effect. In all, more than 86% of respondents said the HST is affecting their business somewhat.

Confusion over the HST remains prominent more than one month after its introduction. Almost 44% of the respondents said that home buyers and sellers had some awareness about how the HST applies to a home sale transaction, while 24% had a low level of awareness.

“We wanted to understand the impact HST has had since it was introduced, and what we found is that there is a need to better educate home buyers and sellers to ensure they understand when the HST is applicable,” said Phil Soper, chief executive of Royal LePage. “According to our realtors who work in BC and Ontario communities every day, misconceptions about the HST are having an effect on the market in both provinces.”

The HST applies to the purchase price of a newly built home, and fees for services and commissions associated with any real estate transaction, but it does not apply to the purchase price of resale homes.  Resale homes comprise the bulk of transactions in the Canadian housing market, and the majority of agents surveyed by Royal LePage indicated that new home sales account for less than 10 per cent of their business.

“While we predicted that the prospect of rising interest rates would put a damper on the housing market, our agents are finding that the HST is actually having the greater impact on buyer behaviour, at least in the short-term” said Soper.

Results from the Royal LePage Real Estate Advisor Survey, conducted online at the end of July 2010, can be found below.

Survey Results:

What impact has the introduction of the HST had on the real estate market in your region?

Significant impact: 36.5 per cent (279 responses)
Some impact: 49.7 per cent (380 responses)
No impact: 5.2 per cent (40 responses)
Don’t know: 8.6 per cent (66 responses)

In your opinion, what factor has had a greater impact on the housing market’s recent activity?

HST: 43.9 per cent (336 responses)
Rising interest rates: 28.4 per cent (217 responses)
Other: 27.7 percent (212 responses)

Based on your recent interactions with home buyers/sellers, please describe the level of awareness about the impact of HST on real estate transactions?

High level of awareness: 31.4 per cent (240 responses)
Some awareness: 43.9 per cent (336 responses)
Low awareness: 24.1 per cent (184 responses)
Don’t know: 0.7 per cent (5 responses)

In the past three months, how often have new or prospective clients (home buyers or sellers) asked you questions about the HST and how it applies to a real estate transaction?

Many questions – I am asked frequently: 57.1 per cent (437 responses)
Some questions – I am asked occasionally: 28.8 per cent (220 responses)
Few questions – I have been asked only a few times: 11.9 per cent (91 responses
?No questions: 2.2 per cent (17 responses)

What percentage of your business is new home sales (as opposed to resale)?

None: 30.7 per cent (235 responses)
Less than 10 per cent of business: 53.9 per cent (412 responses)
11-25 per cent of business: 10.5 per cent (80 responses)
26-50 per cent of business: 2.9 per cent (22 responses)
51-75 per cent of business: 0.9 per cent (7 responses)
76-100 per cent of business: 1.2 per cent (9 responses)

Although the HST introduction certainly is a contributing factor to slowing July 2010 sales in BC, it is still too early to determine the full impact of the HST since it was introduced.

Vancouver mortgage broker, Scott Dawson said, “There has been a number of changes that have affected the real estate market. April 19th of this year there was changes to Canadian mortgage rules, add to that the HST on July 1st and it makes for a lot of confusion in the market for buyers and the stats show that effect in my opinion.”