The Federal Budget and the Real Estate Industry

Governor General Michaelle Jean delivered the Throne Speech this week, marking the opening of the third session of the 40th parliament and ending the prorogation. The federal budget was also announced, and though important issues like the rewording of the National Anthem and freezing parliamentary salaries were brought to the nation’s attention, only a few key homeownership and real estate-related matters were touched upon.

The federal budget was shown to have significantly fewer measures for the 2010 year in contrast to the 2009 year, when stimulating the housing market was a priority.

The extremely popular Home Renovation Tax Credit will not be coming back this year, much to the dismay of would-be renovators. Homeowners were able to receive a tax credit for the 2009 tax year for up to $1,350 on renovations and supplies purchased up until February 1st.

Although Finance Minister Jim Flaherty also mentioned that the Canadian housing market was stable and healthy, the Canadian Home Builders’ Association told the Canadian Press after the announcement of the budget that a permanent 2.5 GST home renovation tax would help offset the GST hit that renovations take in general. The CHBA also mentioned that a GST credit would help to fight the underground economy by not supporting unregistered and non-legit businesses who accept cash only and offer little recourse for homeowners should the job be poorly done.

“This is the single most important step the federal government can take to protect housing affordability and choice,” said Gary Friend, president of the CHBA, “What Canadians need now are permanent policies that end the erosion of housing affordability.”

Previously, home buyers could only withdraw $20,000 from their RRSP to put towards a down payment on a home, and this amount was raised to $25,000. A tax credit for first-time home buyers was also introduced.