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GST's impact on housing market is more perception than reality.

GST's impact on housing market is more perception than reality

It's still too early to tell what affect the goods and services tax (GST) is having on the home buying market, according to the heads of the Thunder Bay and Sudbury real estate boards.

The recession, as well as the fact that the tax was introduced during a traditionally slow time for sales, has mitigated the brunt of the tax's impact.

Since the traditional building season has yet to pick up a full head of steam, the tax's impact will not fully be known until sometime this summer. Right now, its only effect on the housing market has been confusion.

Robert Pfaff, president of the Thunder Bay board, said the removal of the federal sales tax on building materials and the addition of the 4.5-per-cent GST on new homes has resulted in a net price increase of about one per cent.

However, Pfaff said the "public's perception" is that the GST has had a large impact on home prices.

In an effort to educate prospective buyers, the Sudbury Real Estate Board, in conjunction with the Ontario Real Estate Association, is planning a seminar for 250 potential first-time home buyers on May 13.

Mary Crowder, president of the Sudbury board, said the seminar is designed to explain to first-time buyers what costs they can expect when purchasing a home.

Like Pfaff, Crowder said the GST's main effect has been confusion.

"There are concerns and a lot of questions from buyers," she pointed out.

Potential buyers are not the only ones with questions about the GST. Realtors have also been stumbling through the myriad of GST regulations.

"I've had more questions from my agents than from the public," said Sam Butkovich, first vice-president of the Sault Ste. Marie Real Estate Board. "There were questions about what was applicable and about the input credits. The tax drove us crazy for the first month."

Butkovich said that GST is the least of the worries for Sault Ste. Marie realtors. The board official pointed out that the market stalled during the lengthy strike at Algoma Steel Ltd. last summer. High interest rates through part of 1990 and into 1991 also had an effect.

"It had just started picking up when Dofasco made its announcement (that it would not subsidize Algoma)," he said, adding that the full effect of the GST will be seen by home sellers when they pay the realtor's commission - plus seven per cent.

Labor problems also hampered sales figures in Thunder Bay. Strikes at Canadian Pacific Forest Products Ltd. and at Abitibi-Price kept prospective buyers on the sidelines.

INCREASES

Despite the recession, both Crowder and Pfaff are expecting 1991 sales figures to either match or better 1990's.

"In the long run, I think 1991 will be comparable to 1990," Crowder said. "I don't think it will be better or worse, but if you average out the months it should be about the same."

Pfaff said the Thunder Bay board predicts that sells will show a modest increase over last year's numbers.
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Title Annotation:Report on Construction; goods and services tax on building materials
Publication:Northern Ontario Business
Date:May 1, 1991
Words:510
Previous Article:Commercial construction slowed by the recession.
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