Hoping to shore up the foundation of the province's housing sector, the B.C. government used its budget to unveil a pair of home tax credits.
The B.C. First-Time New Home Buyers' Bonus will offer a temporary, one-time refundable income tax credit of up to $10,000 for first-time buyers who purchase a newly constructed home.
The B.C. Seniors' Home Renovation Tax Credit will offer a refundable personal income tax credit to assist people age 65 and over with the cost of permanent home renovations. The maximum credit will be $1,000 annually.
The credits come less than a week after the Liberal government announced measures to support new-home buyers and builders as the province makes the transition from the HST back to the PST. The government will officially return to the provincial sales tax on April 1, 2013, a year and a half after B.C. residents voted to abolish the harmonized sales tax.
"We hear from people that talk about the challenge their children or grandchildren have getting into their first home," Finance Minister Kevin Falcon told reporters Tuesday. "We believe a $10,000 contribution towards those first-time purchasers of new homes is a great contribution."
Mr. Falcon said the new home buyers' bonus has the added benefit of supporting the construction industry, which is forecast to slow across the country over the next 12 months.
Cameron Muir, chief economist with the BC Real Estate Association, said the new credits are certainly welcome, given the pressure the housing market has faced as a result of the HST.
"That should induce additional sales activity, as well as later on we'll likely see housing starts rebound as a result of that demand," he said.
Mr. Muir said home prices are expected to remain flat this year and next. He said first-time buyers are leaning toward condominiums and are more likely to choose brand-new units because they have warranties. Condos also tend to be significantly cheaper than single detached homes.
"That $10,000 gives them an incentive to buy this year, rather than wait until next year," he said. "That should be enough to at least accelerate some sales activity, though we can't certainly be sure how much."
Last week, the province announced it would raise the HST rebate threshold for new-home buyers to $850,000, up from $525,000. Mr. Falcon said at the time it would mean 90 per cent of new homes would be eligible for the rebate of up to $42,500.
The new home buyers' bonus will remain in effect until March 31, 2013. The credit will be calculated as 5 per cent of the purchase price, to a maximum of $10,000. Only one credit can be claimed per home.
For single individuals, the bonus is reduced by 20 cents for every dollar in net income over $150,000. For a couple, the bonus is reduced by 10 cents for every dollar in net family income over $150,000.
The seniors' home renovation tax credit will be available for expenditures on or after April 1, and can be claimed by seniors or those who share a home with a senior relative.
The government intends to include handrails, wheelchair ramps and motion-activated lighting, among other things, as eligible expenditures.
General maintenance, such as roof and window repairs, and home care and housekeeping services, are expected to be deemed ineligible.
The tax credits must still be approved by the legislature.