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8 facts we do know about the HST and Real Estate

Posted in: Blog, Real Estate by Paul McEwan on November 3, 2009

Come July 1st 2010, the Harmonized Sales Tax [HST] will raise the cost of buying a new home in Vancouver. Does this mean there will be a buying frenzy on new homes prior to July 1st 2010? If so, will this increase in demand for new homes cause them to go up in price even before the HST hits us? How will the resale market be affected?

Here’s how the price of a new $700,000 home in BC or Vancouver will be affected. The homebuyer would pay a total of $84,000 in BC HST taxes (12% on $700,000). But wait, there’s a homebuyer HST rebate for purchases above $400,000. The homebuyer would receive the $20,000 back which reduces their HST cost to $64,000 in taxes for a total of $764,000. Currently, the 5% GST applicable to the same home would cost only $35,000 (a $29,000 difference). *This does not include the HST applicable to closing fees.

The HST brings up a lot of questions. Here are 8 facts we do know about the HST.

1. Implementation of the BC Harmonized Sales Tax will take place on July 1, 2010.
2. The Harmonized Sales Tax (also known as the new BC HST) is 12% tax applicable to most goods and services, including new homes, real estate, and property.
3. The new B.C. HST 12% Tax is the combination of the Federal Goods and Services Tax (5% GST) and the Provincial Sales Tax (7% PST).
4. The BC HST is NOT a 12% real estate tax, but a provincial harmonized tax on most goods, services and consumer products including new homes.
5. Currently, new BC and Vancouver homes are subject to 5% GST (federal tax) in which first time homebuyers or investors can receive GST rebates. This 5% GST will be replaced with the higher 12% B.C. Harmonized Sales Tax (HST), a 7% difference in taxes on the total purchase price of a new British Columbia home or property.
6. The B.C. HST program will give partial rebates for new BC homes priced up to $400,000. The government will give these homebuyers a partial five per cent BC HST rebate on the provincial tax side which makes any new B.C. home or Vancouver property $400,000 or less no more expensive than it is today.
7. Homebuyers looking to buy new Vancouver property over $400,000 will receive a maximum BC HST rebate of $20,000, but will see the purchase price above that level subject to the extra five per cent tax rate system.
8. The British Columbia Harmonized Sales Tax of 12% HST is also applicable to any costs and fees associated with your property/home purchase including legal/notary fees, commissions and other closing costs.