Canada’s housing market is in dire straits. I haven’t seen it this bad since the early 1990s.
Most government initiatives are failing to stimulate construction. The main exception is federal rental construction incentives, which have spurred rental construction to levels not seen in decades. Some government initiatives are actually deterring new home construction, such as the federal Liberal promise of GST cuts for first-time buyers of new homes. The longer it takes for the GST cut to be implemented, the longer buyers will delay their purchase in hopes of securing a lower, more attractive purchase price.
Finally, Mattamy Homes has decided to act upon this by guaranteeing the GST cut now, before it is formally implemented.
I have been recommending this approach for months. I even lobbied Scott Aitchison (Conservative housing critic and shadow minister) and Nate Erskine-Smith (recently replaced federal housing minister) to make the GST cut on new homes effective immediately, to no avail.
Buyers are sitting on the fence, anticipating further price drops and waiting for the GST cut. Psychology is the main obstacle, so we need to overcome the buyer’s mental and emotional hurdles.
I recommend offering price guarantees and passing on GST savings to buyers right now.
Agreements of Purchase and Sale (APS) can be written as an option to buy in July, when new GST rules are expected to be in effect. Alternatively, the APS can state that the agreement will be rewritten after July 2 – but regardless, the buyer gets the original fixed price. The buyer must warrant that they are a first-time buyer, and the APS is cancelled if the buyer does not qualify for any reason.
We need more aggressive, psychology-informed marketing strategies if we want new home buyers to return to the market.
JohnAmardeil.com 