Monday, January 19, 2009

Real Estate industry seeks jump-start

From Friday's Globe and Mail
January 15, 2009 at 8:30 PM EST

The real estate industry wants the federal government to bolster the housing market, as it bids goodbye to a bleak 2008 and braces for an even tougher year ahead.

The Canadian Real Estate Association (CREA), a trade organization representing real estate agents, is asking the government to broaden the Home Buyer's Plan, which allows some home buyers to withdraw RRSP funds for their purchases.

"The government has already moved to help credit markets and our
chartered banks, now it's time to take direct and immediate action to help ordinary Canadians," said CREA president Calvin Lindberg in a statement.

CREA is asking Ottawa to raise the limit on RRSP withdrawals by first-time home buyers by $5,000, to $25,000, and extend the program to anyone buying a home. In addition to first-time buyers, the withdrawals are now permitted to those buying or building homes for related people with disabilities.

Economists declared the housing boom dead last year, as weakness that started the year before in Alberta spread across the country.

Existing home sales were at the lowest level in six years in 2008,
according to CREA statistics released Thursday. The average home price declined slightly year-over-year to $303,594, and is expected to further erode in a trend that also began in mid-2008. The picture got darker toward the end of the year, with prices falling by 10 per cent year-over-year last month, and sales to their lowest level for a December in eight years.

"With job losses accelerating late last year, sales activity will likely remain under pressure, while the imbalance of listings relative to sales should keep prices in correction mode. All told, 2009 is shaping up to be another difficult year in the Canadian housing market," said Robert Kavcic, economic analyst at BMO Nesbitt Burns Inc.

In a recent report, the Conference Board of Canada said it expects home prices to slide by 10 per cent in 2009, a forecast that was in line with economists' estimates. In context, the average value of a resale home surged nearly 80 per cent in the six-year period ending in 2007.

The market for new homes has also been weakening, and both price growth and new building intentions are slowing. For 2009, the CMHC's outlook is for 177,975 starts, with construction expected to fall dramatically before staging a mild recovery in 2010.

In a measure of how the market is getting tougher, one Vancouver developer has decided to slash prices on inventory that has been selling at a sluggish pace.

The Onni Group said Thursday that it will cut prices by up to 40 % on 375 unsold units at seven completed condo developments in the Vancouver area, in a one-day "liquidation" sale that will take place on March 7.

The company decided the financial benefits of selling at reduced prices outweighed holding the units over the longer term, said Chris Evans, executive vice-president at Onni. The developer wants to free up funds to take advantage of opportunities when the market picks up, Mr. Evans added.

Looking for ways to stimulate the economy during the downturn and offset job losses in construction, which totalled 44,000 in December alone, the Harper government has been floating the idea of a tax credit for home renovations in the Jan. 27 budget.

The CREA initiative may face a tough time winning over policy makers. In fact, the Canadian housing market probably doesn't need the help, said Benjamin Tal, economist at CIBC World Markets Inc.

"Because this is a measured correction rather than a U.S.-style meltdown in the housing market, there is no urgent need to fix it. In an economic recession, we need to allow the housing market to balance itself in order to emerge on a more solid foundation."

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