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New Local Home Jan 27, 2011
If the government really wants to reduce Canadian consumer debt, it should look at reducing
the tax load on new homes. Greater Vancouver Home Builders' Association president and
CEO Peter Simpson says it would be a good idea for government to review new-home taxes,
after Finance Minister Jim Flaherty introduced more new lending rules on Canadian mortgages
last week - the third time he has done so in three years. Simpson notes a 2009 Canada
Mortgage and Housing Corporation study conducted before the HST was introduced shows
purchasers in a Metro Vancouver municipality pay the highest percentage of
government-imposed charges on a median-priced home.
An example in the CMHC study highlights that a $567,207 new home in Surrey
means the homeowner pays $108,050 in taxes, fees and levies (and that's GST only)
- 19.05 per cent of the total sale price of the home. Vaughan, Ont. came in second at 18.86
per cent, while the lowest in the country was Whitehorse, Yukon at 4.7 per cent.
"If (government) is serious about reducing the consumer debt load, they should
look at mitigating the tax load that all levels of government - federal, provincial,
regional and municipal - place on new homes," says Simpson. "People should live
within their means. First-time homebuyers should buy what they can afford and existing
homeowners should be responsible when dipping into their home equity for other purchases,
he says, and adds the new rules will probably have a greater impact in this region
than anywhere else in Canada, as "we have the country's highest home prices."
In fact, home prices reached a record high of $505,178 for an average home in
B.C. in 2010, according to the B.C. Real Estate Association. The new lending rules will come into
effect March 18. They are:
- Mortgage amortization periods will be reduced from 35 to 30 years.
- The maximum amount Canadians can borrow to refinance their mortgages will be
lowered from 90 per cent to 80 per cent of the value of their home.
-The government will withdraw its insurance backing on lines of credit secured on
homes, such as home equity lines of credit.
The new rules are intended to ensure Canadians
don't slip into unmanageable debt. Simpson is pleased the new regulations don't affect
the down payment threshold on homes or current historically low mortgage rates, but emphasizes
government-imposed fees are already extreme, and that first-time buyers will likely be the most affected.
"There's at least four fingers in the tax pie and only one taxpayer," he says. "My biggest piece of advice to
homebuyers would be to go to a lending institution to get pre-approved for a mortgage
and then look at homes in that price range, comfortable in the fact that they will
be able to afford them."
He notes the GVHBA is hosting its 17th annual First-Time Home Buyers Seminar
on March 22, an event featuring a wealth of home buying and mortgage information
that typically attracts up to 850 prospective homebuyers (register at www.gvhba.org).
Local mortgage broker Jamie Moi agrees that first-time homebuyers will likely be the
most affected by the new rules, and urges potential purchasers to get their applications
for financing to a lender - now. For example, Moi says, a young couple
with a combined income of $100,000 and about $30,000 of debt who have saved
$25,000 toward a home could increase their purchasing power by $25,000 if they place
an offer on a home before March 18.
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