The federal budget might help homeowners with improvements.
Finance Minister Jim Flaherty may have something in his bag for homeowners when he unveils the federal budget on Tuesday (January 27).
It could come in the form of a tax credit for home renovations in general, or be limited to retrofits of energy-efficient systems, according to Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association. Either way, Simpson says, it would help owners pay for home improvements.
“Anything that the government does in that regard will be of assistance,” Simpson told the Georgia Straight.
With the real-estate market in a slide, the reasoning behind such a move is that housing upgrades will prop up the construction industry. Simpson believes that about two-thirds of the $7-billion home-renovation business expected this year in B.C. will be in the Lower Mainland. “That will put people back to work again,” he said. “It puts money in homeowners’ pockets.”
Whether or not tax credits will spur a significant number of homeowners to renovate their houses remains to be seen.
In the past, home renovations have grown along with a hot housing market, according to Canadian Housing Observer 2008, the latest report in an annual series published by the Canada Mortgage and Housing Corporation.
A strong labour market also contributed to renovation spending that the CMHC calculated at $49.5 billion nationwide in 2007.
“The solid performance of the housing market, strong employment and income growth, and low interest rates have contributed to strength in renovation spending in recent years,” the report states. “The uninterrupted growth since 1999 continued in 2007, with total spending on alterations, improvements and repairs increasing nine per cent from 2006.”
As the report notes, the renovation market benefited from Canada’s overall economic growth of recent years.
“High employment levels translated into steady income gains which in turn boosted consumer confidence and provided greater financial means for households to upgrade their homes,” it explains. “Low mortgage rates, record sales of existing homes, and high levels of housing starts in recent years also contributed to the pick-up in renovation activity. High levels of sales mean that more homebuyers are more likely to invest in renovation, which pushes the total renovation spending up.”
But conditions have changed significantly since then.
On January 12, the B.C. Real Estate Association reported that housing sales in the province dropped by more than a third in 2008 compared to 2007. Some 68,923 units were sold in 2008, the lowest number since 2000.
The association noted that sales of listed properties were down 49 percent in December 2008 compared to the same month the previous year. As well, total sales in dollar terms dropped 52 percent.
The Vancouver-based Central 1 Credit Union, which represents credit unions in B.C. and Ontario, has predicted that personal incomes will decline this year, as well as in 2010. In a press release issued January 15, Central 1 noted that the provincial economy will contract this year “as a result of falling commodity prices, weaker export markets, lower consumer and business confidence levels, tighter credit conditions and recessions in the forestry and housing sectors”.
Back in October, Central 1 predicted that housing sales would decline by 17 percent in 2009. It also forecast that prices would fall before a turnaround in 2010, and that new construction would decline by 37 percent in 2009.
Conservative Delta–East Richmond MP John Cummins wouldn’t say for certain whether or not tax credits for home renovations will be part of the budget.
However, Cummins pointed out that such a measure could help the Harper government the next time it faces the electorate.
“When you’re dealing with budget items, let’s face it—budgets are political documents,” Cummins told the Straight. “They’re crafted to meet the approval of the public. They’re crafted to help the governing party win reelection. That’s the political reality.”