Did HST cause The Housing Slump?

August 17th, 2010 · 7 Comments · Buying or Selling Your Property, Personal House

Why Are House Prices Going Down?

In today’s news, irritating me, is this article out of Vancouver HST a Prime Suspect in Home Buying Chill. What are they smoking out there?

Perhaps I can help illuminate this situation for them. HST is the least of the culprits.

  1. The average house price in Vancouver is a mind blowing $658,000
  2. The all important first time buyer now has to accumulate a 5% down payment of $32,900 plus lawyer and closing costs. This will take time and most people will have to learn a new skill, saving.
  3. Wages have not gone up.

HST is only charged on new homes. The slump is not affecting only new homes it is affecting all homes because the people have stopped drinking the Kool-Aid.

The Internet as an Indicator

When you start having websites like Crack Shack or Mansion the public sentiment is rebelling against unreasonable prices.

Then there’s the absolutely hilarious post on Vancouver Real Estate Anecdote Archive about the Froogle Scott Chronicles, this is a story about a poor homeowner who decides to tackle a renovation project in his house.

The very existence of these websites proves the widespread nature of the problem. This issue is so dark and deep and noxious no one even wants to think about it. We’re in a world of ostriches.

I can’t be the only person who thinks that is way too much to pay for a house. Are we all going to be the bank’s indentured servants working endlessly to pay mortgage interest? Who ever thought that was a good plan? Forget Freedom 55 now it’s Freedom 95.

The reason why people have stopped buying houses is because they can’t afford to buy… and even if they could they’d rather not because it just costs too much. Take me for instance, if the only purse available on the market was a Louis Vuitton purse I’d be schlepping my stuff around in a grocery bag WITH PRIDE talking about how crazy people who buy purses are. I don’t have to keep up with the Jones’, because I know the Jones’ have anxiety attacks when they look at their bills. Maybe one day, I’ll even be cool.

If you liked this article… read it again. I just want you to be happy. You’ll be even happier if you sign up for FREE RSS or Email subscription (Upper Right) the super special today is a pair of rose coloured glasses so you don’t pass out when we get the August numbers from CREA.

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7 Comments so far ↓

  • Jordan

    What you write about Vancouver applies pretty much equally to Toronto and its slumping market. And I agree with you that the HST is a red herring, but one played up to the hilt by the RE industry, who managed to convince everyone that they had to “beat the HST” — even on resale homes where the added cost would have been $1-2,000 at most.

    The craziest aspect of the Vancouver market is the price-to-income ratio there. It’s above 9. It’s a miracle that the city has any local economy at all, given how much of their salary people must be forking over to the banks to service those mortgages.

  • Rachelle

    The extra expense of the HST is borne on top of the Real estate commission which is paid by the seller of resale homes. I can’t imagine a scenario where this would be a deterent to buyers.

  • Froogle Scott

    Hey Rachelle,

    Thanks for the mention and the link. I’m glad you got some laughs from reading the latest episode of the “Chronicles”. I do see some humour in a number of the situations myself. I mean, at times you have to laugh, even if it’s through gritted teeth.

    I’ve spent a bit of time on your blog, and want to spend more. As a landlord as well as a renovator (I must really like the hard road), it looks like you have some great insights to share based on your years of experience.

    And yes, the advent of HST in BC is not the thing that’s going to bring down housing, if housing does crash. A smaller, contributing factor perhaps, but not the main impetus. I think market sentiment (finally waking up from the Kool-Aid induced madness), along with a possible double-dip recession, are going to be the more likely culprits.

    • Rachelle

      Dear Froogle,

      I found it funny because I done plenty of renovations and this is exactly what it’s like. Starting a reno is like peeling an onion, you never know what you’re going to find under the next layer.

  • Froogle Scott

    Right. And if it’s like some of the onions I buy, you get to that layer where it’s all soft, rotten, black patches…

  • Can we Ever Expect the Truth from CREA | Landlord Rescue

    […] On a regular basis I get upset with the Canadian Real Estate Association and to a lesser extent the local real estate boards. I find their whistling in the dark irritating. We are in the process of a major adjustment of the real estate market and we could use some good guidance and information. I find their dissembling and prevarications and smoke screens offensive. I wrote about one of their smoke screens and how ridiculous it was to Blame the HST for the Housing Slump. […]

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