The HST affect on BC's Construction Industry

The financial markets made many headlines in the month of October 2008. The looming bank crisis and the freefalling stock markets prompted many financial commentators to dub the week of October 6, 2008 as the “Black Week.” Consequently, there were inescapable ramifications for the construction industry. Year over year stats reveal that October 2008 single family and multi family building starts fell by 42%. As the financial markets attempted to make a comeback, the Surrey construction market remained in a slump. It would take the introduction of the HST nine months later to finally kick start the construction industry.

Premier Gordon Campbell introduced the Harmonized Sales Tax (HST) on July 23, 2009, which was to take effect July 1^st, 2010. Was the impending HST essential to the stimulation of the construction industry?  Yes, year over year statistics suggest the HST had a notable effect on the building starts for single and multiple family dwellings in Surrey. July 2009 building starts out paced July 2008 by 17% and month over month building starts nearly doubled in July 2009. It appeared that the construction industry had recovered to its pre October 2008 levels.

The industry remained buzzing with activity for the following year. Year over year statistics reveal that the industry outpaced pre financial meltdown building starts each month leading up to the implementation of the HST.  Builders hoping to avoid the added cost of the HST ramped up their efforts to churn out new homes at an increasing rate. Buyers did their part by consuming newly built homes as fast as they were produced. Both parties hoping to beat the implementation date of the HST, July 1, 2010.

The new tax had many implications for B.C.’s political scene and economy.  The year leading up to the implementation of the tax, saw many British Columbians attempting to block the HST by signing petitions. On Sept ember 14, 2010 a referendum was announced by the BC Government to be held a year later, which would decide the future of the HST. Unable to convince British Columbians of the merits of the HST and feeling the heat of the unpopular tax, Premier Gordon Campbell resigned from office. Unless public sentiments change dramatically over the upcoming months, the HST will surely be defeated in the September 20 11 referendum. Meanwhile, the Harmonized Sales Tax put a drag on the number of new home starts in Surrey.

In anticipation of the upcoming referendum and the probable elimination of the HST, builders have temporarily placed a hold on some construction projects. The question is: if the HST is defeated, will it provide a boost to the construction industry? I believe the defeat of the HST will lead to builders removing the holds on construction projects, and thereby providing a shot in the arm to the industry.  The depth to which the elimination of the HST affects the industry remains to be seen.