Buyer incentives offered by industry
Calgary builders have pulled their cowboy hats down around their ears, wrapped the reins tighter in their hands and laid back in the saddle, ready for a months-long ride on this wild-eyed bucking horse named recession.

Calgary Herald ArchiveThe housing industry must fine-tune its operations for the downturn.

It was right around Stampede time in 2007 that things started to go sideways for the region’s single-detached building sector.

Show home traffic started to tail off, sales declined and consumer interest began to wane.

The ride got bumpier in 2008 — and Canada Mortgage and Housing Corp. says it’s going to be a while yet before the market bottoms.

“This will be a year of retrenchment for builders,” says senior market analyst Lai Sing Louie of CMHC after releasing the federal agency’s most recent look at the current market. “But I see some increase in 2010 if the economy strengthens as projected.”

Meanwhile, builders are coping. They are fine-tuning their operations, adjusting their specifications and offering buyer incentives.

Some developers have reduced lot prices to support builders in their communities.

Potential buyers are also getting added assistance from lenders who are reducing mortgage rates.

The five-year posted rate declined from 6.17 per cent in December to 5.78 in January, the lowest it’s been since 2006. “So, the cost of borrowing is coming down and that should be good news for those considering buying,” says Louie.

As part of its recent budget, the federal government introduced a pair of measures in January to further stimulate home purchases, particularly for first-time buyers.

The first measure is a First-Time Home Buyers’ Tax Credit to help offset legal fees and land transfer taxes.

For homes bought after Jan. 27, a 15-per-cent tax credit applies on expenditures of up to $5,000 — a maximum tax savings of $750.

In addition, first timers can make better use of a federal program introduced a few years ago.
Finance Minister Jim Flaherty announced a new withdrawal limit for the Home Buyers’ Plan, which allows tax-free withdrawals from RRSPs to buy first homes.

The new withdrawal limit is $25,000, up from $20,000.

Both the increased withdrawal limit and the new tax credit can also be used by disabled owners of existing homes who are eligible for a disability tax credit and who want to buy a more accessible dwelling.

In releasing his forecast for this year, Louie presented figures showing that work will start this year on 3,800 detached homes in and around Calgary — a decline of slightly more than 13 per cent from 4,387 starts in 2008.

But come 2010, activity will move back up to 4,200 homes, he says.

With governments doing their part to pump more life into the Canadian economy, benefits might begin to show in the later stages of this year, but more likely in 2010.

Calgary’s economy was managing to holds its own for most of last year — until the final three months.

“A lot of things happened in the fourth quarter,” says Louie.

“There was bad news swirling all around us. Oil prices started to sag, stock prices got more volatile and U.S. investment banks started to go under — that’s when things started to really unravel.”

As an example of how elements in the marketplace turned, Louie says that as late as last September, there was job creation growth in Calgary.

But for the next four months, including January of this year, fulltime job losses reached 32,200.

Offsetting that, to a degree, was the fact that part-time employment gains totalled 27,400.

But with an unemployment rate of 4.2 per cent, Calgary continues to have a tight labour market.