With the switch from our current system to the new HST system looming ahead in BC and Ontario, many are wondering what the effect on real estate markets and real estate costs will be. Typically, the media and other doom-sayers exaggerate the HST as a way the government will squeeze tens of thousands of dollars more out of us when buying a home, but the situation isn’t as bad as some make it out to be.
First off, the HST only applies to new homes. Resale homes are exempt and
will remain the same as they’ve always been. However, this does not mean
that all buyers of new homes are going to be hit hard.
Buyers of new homes under $400,000 are entitled to a rebate of 6% of the
home’s final selling value, which means that they are affected much less by
the HST than those who are buying homes over that $400,000 mark. Before the
HST switch, any new homes, regardless of price, were exempt from the 8% PST.
Under HST, this 8% exists as part of a single 13% tax. Considering this,
even with the 6% rebate that is being offered under HST, one still pays out
2% more in taxes than one did before (certainly preferable, but still an
increase).
What must be considered beyond the price of the property, however, are all
the costs associated with buying and selling a home. These are not exempt
from HST, and many are going to see a stiff increase in price after HST
forces them to charge a full 13% tax – more than double the 5% in GST they
currently call for. As a seller, your commission to the Realtor is going to
see this 8% increase in tax, as well as your lawyer’s fees. As a buyer, home
inspections and moving costs will see this 8% increase, showing that prices
are going up on both sides.
The long and short of all this is that the HST definitely will increase
costs associated with real estate, both on the buying and selling side. This
is not something that anyone would wish for, but it’s also not necessarily
the tens of thousands of dollars some people seem to think it will be. The
only time you rarely need to be careful to consider new costs is when buying
a home straight from construction, but even then only if it is above the
half-million dollar mark in price.
