Other

Download Document

Other

Download Document

Other

Download Document

Other

Download Document

Other

Download Document

DON CAYO
Sun

Anyone with half a brain — and it’s not clear this necessarily includes the taxman — needs no in-depth study to finger property transfer taxes as a perverse way for governments to raise money.

For consumers, the “ small” bite of several thousand bucks — one or two per cent of the price of a home or business — morphs into tens and tens and tens of thousands over the life of a typical mortgage. Or even more if purchasers start small and trade their way up to higher-value properties.

For government, it’s a hopelessly inefficient tax. It smothers potential business investments. It discourages home ownership. And, thanks to those long-term mortgages, it extracts at least two bucks out of taxpayers’ pockets for every one dollar gained by the provincial treasury.

So I was interested in a new C. D. Howe study, even though it focuses just on Toronto, because it nails down precise numbers to show how counterproductive such a tax is. Toronto is the ideal place to study because its transfer tax is just one year ole. And the C.C. Howe researchers were able to get rid of all the “ noise” — factors such as market conditions that might skew the figures — by comparing neighbourhoods that are just inside and just outside the city boundaries.

Their findings? The tax dampened prices by an average of $ 6,400 in a city where homes cost almost as much as in Vancouver. And, while this might be a good thing if people could afford to buy, this isn’t the case. The extra money being siphoned off by government means that, in just one year, at least 3,500 families were discouraged from buying. ( These figures translate to a 1.5-per-cent price decrease, and a 16-per-cent reduction in sales, which — tellingly — was more pronounced for low-cost homes than for the pricier ones.)

In some cases, this means families continued to rent. In others, they didn’t move from lower-cost houses that might have been sold to firsttime buyers. Either way, it’s bad news for families, and bad policy for a city trying to meet the housing needs of its citizens.
Such a precise study would be difficult in B.C. because it’s the province, not an individual city council, that imposes the property transfer tax. Thus there’s no way to compare neighbouring jurisdictions.

But Benjamin Dachis, one of the study’s authors, says it’s safe to assume the same perversities apply here. The Toronto tax is lower than the B. C. tax as it applies only to the land, not the buildings, and it starts at 0.5 per cent, not one per cent.

Dachis also notes that — as Victoria is no doubt learning to its chagrin — PTT is an undependable way to raise money. The revenue it generates swings wildly with economic swings.

And as an inducement for outsiders to move to “ the best place on Earth”? This may be where it fails the most profoundly.

Bad enough that B. C.’ s housing prices give pause to virtually all migrants, but the PTT flies in the face of the tax image the province has worked to cultivate. A graph produced by the B. C. real estate association depicts just what new middleclass arrivals can expect in their first year. It’s the lowest income tax bill in Canada, plus a PTT bill roughly two times larger.

Victoria defends this as good policy. And you wonder why the rest of Canada so often wonders what we’re smoking?

Other

Download Document

USA Today

WASHINGTON (Reuters) — Pending sales of existing homes fell less than expected in October, Realtors said Tuesday, raising cautious optimism of some stability in the distressed housing market.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in October, slipped 0.7% to 88.9 from an upwardly revised reading of 89.5 in September.

October’s reading was 1.0% lower than a year earlier. Economists polled by Reuters ahead of the report were expecting pending home sales to drop 3.2%.

Pending sales declined by a revised 4.3% in September.

“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” said Lawrence Yun, the association’s chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”

U.S. government bond prices, which tend to benefit from any bad news about the economy, pared some gains on the report.

The collapse of the U.S. housing market has unleashed the worst financial crisis since the Great Depression and plunged many major economies into recession. Stability in the housing market is key to any economic recovery, economists say.

“We’ve seen some stabilizing in existing home sales. But it doesn’t mean the whole market is recovering. We are going see some favorable moves in home sales on the margin with the recent plunge in mortgage rates,” said Lindsey Piegza, market analyst at FTN Financial in New York

Across the country, pending home sales plunged 8.7% in the West, and tumbled 4.3% in the Midwest. In the South pending sales surged 7.8% and gained 0.6% in the Northeast.

NAR is forecasting existing home sales of 4.96 million this year, rising to 5.19 million next year and 5.55 million in 2010. It is predicting new-home sales at 486,000 in 2008, declining to 393,000 in 2009 and rising to 446,000 in 2010.

Housing starts, including multifamily units, will probably total 934,000 units in 2008, easing to 731,000 next year before increasing to 772,000 in 2010, the NAR says.

It forecast the 30-year fixed-rate mortgage averaging 5.6% in the first quarter of 2009, rising to 6.0% by year-end and averaging 6.2% in 2010.

Copyright 2008 Reuters Limited

REAL ESTATE Sales slowing, too, but analyst doesn