Housing starts in British Columbia fell by 10 per cent in July from the previous month, Canada Mortgage and Housing Corporation said yesterday.
But that trend is expected to reverse for the rest of the year, as demand picks up and some buyers rush to close a deal before the province's new harmonized sales tax takes effect on July 1, 2010.
"Generally, when a tax is announced like this, there could be a pickup in sales activity prior to the implementation of the tax," Carol Frketich, a regional economist with CMHC, said yesterday.
"But to discern it from a regular pickup in the sales, because of stronger economic conditions or job growth - it's going to be hard to determine."
Premier Gordon Campbell announced last month that B.C. will combine its 7-per-cent provincial sales tax with the 5-per-cent federal Goods and Services Tax to create a single 12-per-cent harmonized sales tax.
The province says the new tax will save businesses millions of dollars and make B.C. more competitive with other jurisdictions, including Ontario and the Atlantic provinces, that have harmonized their taxes.
But in letters to the editor, calls to open-line radio shows and online forums, including Facebook groups that have been formed to slam the tax, many B.C. residents are voicing their anger, saying it will make everything from haircuts to dining out more expensive.
The government is also taking a drubbing for introducing the tax after the May provincial election, which resulted in a third term for Mr. Campbell.
Under B.C.'s new system, buyers of homes worth up to $400,000 will receive a partial rebate that will result in them paying about the same amount of tax they do now. Buyers of homes worth more than $800,000 will receive a flat rebate of about $20,000.
In the Lower Mainland's pricey housing market, that could mean many buyers will face thousands of dollars of additional costs if they buy after the new tax kicks in.
National housing starts declined 5.5 per cent in July from the previous month, CMHC said, with most of the drop attributable to the volatile multiple-unit housing segment. Housing starts are expected to improve throughout the rest of the year.
Along with the 10-per-cent drop in B.C., housing starts fell by 17 per cent in the Prairies, 15 per cent in Ontario and 1.4 per cent in Atlantic Canada.
Housing starts increased by 16.6 per cent in Quebec in July.