B.C. initiative is leading to accelerated development schedules, analyst says
The 23-year-old apprentice electrician and paramedic with B.C. Ambulance Service had settled on his two-bedroom home at a project called Outlook, but only learned earlier in the day about a new bonus for first-time buyers announced in Tuesday's provincial budget.
"I heard about it on the radio this morning," said Guemas-Bonell, who takes possession of his 1,220-square-foot home, which he purchased for $295,000, in March.
"This is a huge plus for me," added Guemas-Bonell, referring to a temporary BC FirstTime New Home Buyers' Bonus that will be in effect until March 31, 2013 and is worth up to $10,000. "I was going ahead with the deal before, so this is a nice surprise.
"For a lot of people in my category, the hardest part is getting a down payment," said Guemas-Bonell, who will likely put the extra money onto his mortgage when he gets the tax refund.
"My down payment is $15,000, so it will add up to about 10 per cent of the cost [of the home], which almost doubles my down payment."
But Guemas-Bonell, by buying in Langley, is also part of a buyers' group that industry analysts say stands to get the best bang for its buck with the new tax credit.
Outlying municipalities like Langley, Surrey or Pitt Meadows, where homes are cheaper and buyers can have less money, will fare better, according to a marketing firm that sells condos and townhomes largely to first-time buyers.
"[The bonus] is specifically targeted at first-time buyers and it would make a bigger difference for [Fraser] Valley buyers because it's a bigger percentage of the purchase price," said Cristy Edmonds, vice-president of Fifth Avenue Real Estate Marketing Ltd.
"It would likely be less in Vancouver because in Vancouver you're buying a more expensive property and you're probably making more money to buy that more expensive property."
Michael Ferreira of Urban Analytics Inc., which conducts research for residential developers, agreed that the new bonus - a one-time refundable personal tax credit equal to five per cent of the purchase price of the home to a maximum of $10,000 - will provide a "bigger bang for your buck in the Valley" as a percentage of savings.
Ferreira said most new homeowners in Metro Vancouver will get the full $10,000 credit, which at five per cent is equivalent to a minimum down payment on properties up to $200,000 (for properties over $200,000, it's a percentage of the minimum down payment). In the city of Vancouver, he said, the average price of a 600-square-foot, one-bedroom condo in a concrete building - a typical purchase for first-time buyers - would sell for about $400,000.
With the $10,000 bonus, that's equivalent to 2.5 per cent of the purchase price.
In Burnaby and Richmond, the same unit would sell for $350,000, or 2.9 per cent of the price; in Surrey for $250,000, or four per cent; and in Port Coquitlam for $240,000, or 4.2 per cent.
"I think it's the outlying suburbs that will benefit the most from this."
The bonus declines based on net income starting at $150,000, reducing to zero for single buyers earning more than $200,000 and $250,000 for couples and is based on new-home purchases.
While the bonus is not expected to set the real estate world on fire, it's being seen as an extra incentive for new home buyers to get off the fence and buy their first home.
In Metro Vancouver, that's usually a two-bedroom townhome or a one-bedroom or one-bedroom-and-den condo, with a premium of $150,000 to $200,000 in Vancouver as opposed to Surrey or Langley.
Edmonds, whose firm is marketing homes in Surrey, Langley, Port Coquitlam and Vancouver, said about 60 per cent of their sales are now to first-time buyers and that their townhomes in Langley and Surrey are in the $300,000to$350,000 range with condos in the $150,000-to-$250,000 range. A similar condo at their Commercial Drive project goes for about $350,000, she added. All are wood-frame buildings.
"I think this will get a lot of people coming out and looking again who had put off their decision," she added. "With interest rates lower, it's another added incentive.
"Ten thousand dollars on a $350,000 [home] is a significant amount when you consider that most buyers are buying with five per cent down. They could put [the money] into the mortgage or they could turn it into an RRSP and get a further tax reduction.
Scott Brown, senior vice-president, Colliers International, said he anticipates many developers will move their construction dates up to take advantage of the new tax bonus.
"We're seeing the Panther Group working to accelerate the construction schedule [on The Flats on Georgia, a Vancouver condo project] to ensure they're completed by March 2013, so [customers] are eligible for the rebate."