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Canadian Home Buying Expected to Remain Strong in 2003

Written by Posted On Tuesday, 14 January 2003 00:00

Canada Mortgage and Housing Corporation (CMHC), our federal housing agency, kicked off the New Year by announcing that Canadian home buying will remain strong in 2003. CMHC reports that its recent survey, Consumer Intentions to Buy or Renovate a Home , reveals that an average of 11% of households surveyed in Halifax, Montreal, Toronto, Calgary and Vancouver say they are in the market to buy a home this year. This is the same proportion of Canadians that reported their intentions to purchase a home in the 2001-2002 survey.

For 2003, interest in home buying is strongest among Calgary households, where 13% plan to buy a home before the summer. Home buying interest is also strong in Toronto at 12%, followed by Vancouver (11%), Halifax (10%) and Montreal (8%).

"Low mortgage rates and an improving employment picture have kept housing demand strong", said Cameron Muir, CMHC Senior Market Analyst. "Strong interest in home buying is further evidence that many key Canadian housing markets will continue to perform well in the first half of 2003."

"The report also highlights a number of findings related to intentions to buy. Across the five cities, households intending to buy a home will pay an average of $238,000 on their home purchase and almost three in five households will furnish a down payment less than 25% of the home's value. Home buyers will also likely be first time buyers since 64% of potential home buyers currently rent their homes."

With these patterns of home buying expected in 2003, the federal Home Buyers' Plan (HBP) promises to remain popular.

Under the HBP, 137,959 Canadians withdrew just over C$1.4 million in Registered Retirement Savings Plan (RRSP) funds to purchase a home in 2000. In 2001, an additional 144,521 home buyers took out more than C$1.52 million from their RRSPs to purchase real estate.

The HBP is a program, overseen by the Canada Customs and Revenue Agency , that allows you to withdraw up to $20,000 from your RRSPs to buy or build a qualifying home. If you buy the qualifying home together with a spouse, common-law partner or other individuals, each of you may withdraw up to $20,000.

Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. Under the HBP, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. Generally, you will have to repay at least 1/15 of what is owed to your RRSPs each year until you have repaid the amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for that year.

Based on the relationship between intentions to buy and construction activity observed in 2002, CMHC analysts are optimistic about 2003 home building activity.

"2002 ended on a high note, posting the highest level of yearly starts since 1989, thanks to low mortgage rates, growing employment and increasing incomes", said David Weingarden, Senior Economist at CMHC's Market Analysis Centre. "Total housing starts for 2002 are an estimated 204,857, representing a growth rate of 25.9%, compared to 2001, the highest annual growth rate since 1983."

Is 2003 the year you take the home ownership plunge?

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