Homeowners, retailers hope weak economy will prompt home tax credit extension

The Canadian Press ~ The News
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MONTREAL - Homeowners who missed the boat on government home tax credit programs hope the lagging economy will convince politicians to renew the incentive, which expires Sunday.
Like thousands of Canadians facing uncertain financial situations, Cahit Tugyildiz hasn't felt confident enough to take advantage of the tax savings program.
But the 30-year-old Montreal businessman believes that could change this year if his fortunes improve and the government extends the tax savings program.
"Next year I'm hoping I'll make more money and then I can spend," he said while loading some timber he purchased from a home renovation centre.
"If I get a tax credit I'll spend on the house, why not."
The program allows homeowners to save up to $1,350 on qualified renovations of between $1,000 and $10,000.
But the federal government has given mixed signals about the program's future. Federal Finance Minister Jim Flaherty recently said it would end as planned.
Meanwhile, people like Tugyildiz and the home renovation industry continue to hope that the government will come to the conclusion that a renewal of the popular program is still needed to stimulate the flagging economy.
Home renovations giants Rona Inc. (TSX:RON) and Home Depot say that tens of thousands of customers have signed up for additional in-store incentives tied into the tax credit program. Thousands more likely made purchases on their own.
U.S.-based Home Depot said 25,000 customers took advantage of a six-week promotion last spring that added an additional savings to the tax incentives.
Quebec-based Rona said 17,000 customers signed up for its year-long program that also offered an additional 10 per cent discount.
While Home Depot doesn't segment its Canadian results, Rona said sales of those who registered for its program were $130 million in 2009, with the average project size about $8,000, far exceeding the chain's initial forecast of $2,500.
Much like the week before Christmas, shoppers are still making purchases ahead of this weekend's deadline. Since all projects need to be installed by this date, most consumers are picking up last-minute "stocking stuffers" or purchasing items for do-it-yourself projects.
"Definitely, people are interested and still looking for those last-minute projects they can take on," said Home Depot spokeswoman Tiziana Baccega.
The direct impact of the program is difficult to determine but Rona believes it helped cushion the blow of dramatically lower retail sales.
"For sure, without that program the home renovation business would have been a lot worse than what we are seeing right now," said Claude Bernier, vice-president of marketing and customer innovation.
Bernier credits about half the $130 million in Rona's registered renovation business to the program.
Edward Jones analyst Brian Yarbrough said the program would likely have no long-term impact on earnings of home renovations retailers because it mostly just pulls eventual sales forward.
"I think net net it probably didn't do anything from a sales standpoint," he said in an interview. "But it may have brought people into the stores and introduced new customers to the store and if they can keep those customers that could be positive in the longer term."
Yarbrough added that the government may decide to extend the program because the economy hasn't improved as much as it originally forecast.
"I guess what the government was hoping was that by this point the economy would have improved and consumers would be back spending so they wouldn't need to extend it," he said.
A signal could be given when the federal Conservatives introduce their budget in March.
But Bernier said he's also heard "talk on the street" that the renovation tax credit might become a part of a Conservative election platform if they were to call an early vote.

Organizations: Rona Inc., Home Depot, TSX

Geographic location: MONTREAL

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