Sales of new homes in BC forecast to slow until the HST is removed

Plans to remove the HST and return to a provincial sales tax mixed with the Goods and Services Tax will probably cause some homebuyers in British Columbia to delay purchases until 2013, Central 1 Credit Union forecasts.

The credit union's economist Bryan Yu said in a news release today: “People looking at new homes priced over $525,000 may very well wait until the tax changes lower the 12 per cent hit they [currently] face.”

The credit union forecasts that by the end of the year, home sales in British Columbia will have declined less than one per cent from their 2010 mark.

But while resale home transactions are forecast to end the year 4.7 per cent ahead of 2010, new home transactions will lag by 26 per cent.  

Total home sales are forecast to reach 88,200 units by the end of this year.

While sales will remain soft, the median price will rise 6.8 per cent to $417,000, Yu said.

“The real estate market will remain stable for the next couple years, weighed down by global economic issues, moderate employment and population growth and changes to mortgage insurance rules,” Yu said.

Central 1 forecasts that next year total home sales are expected to increase by about 3.4 per cent, driven by higher new home sales, while resales of existing homes will decline.

But home sales are unlikely to drop dramatically because mortgage rates remain at record lows, maintaining home affordability, the report says.