I recently provided an update on the BC government’s proposal to implement a Harmonized Sales Tax and it’s impact on the Vancouver real estate market. The HST was a surprise to us all. It’s unfortunate that the provincial government chose not to consult those of us directly impacted before announcing the tax.

The Announcement

The announcement of the HST was such a surprise that those affected are scrambling to respond. Both the BCREA and the REBGV are currently trying to figure out exactly how to respond and just what the impacts on the real estate industry are. I expect that we will be hearing more from our industry in the coming weeks on this topic.

If you are purchasing property in BC as of July 1st, 2010 you will have to pay the HST (12%) on new construction (although up to $400,000 will be exempt up to a maximum credit of $20,000). You will also have to pay the HST (12%) on realtor fees, appraisal fees, and home inspection fees. All of these costs were previously exempt from the PST (7%).

The Impact

Perhaps you think that this tax won’t affect you if you aren’t purchasing new construction. I believe that the implementation of the HST on new construction will affect the resale market as well. I expect that we will see resale prices rise approximately 7% in order to balance out with the costs of new construction once the HST is in place.

We were already paying a hefty provincial tax on purchasing property in British Columbia (the PTT which is 1% on the first $200,000 and 2% on the balance). Adding the PST to this tax (albeit only for new construction) only exacerbates the affordability issue in BC (and particularly in Vancouver).

Affordability is the biggest issue in the Vancouver real estate market. With the market just beginning to take off again, it’s nothing less than irresponsible for the Provincial government to impose this tax without at least consulting the industries directly affected.

The Response

The president of the BCREA, John Tillie, recently published this editorial about the HST in the Vancouver Sun.

Please Donate

On June 22nd, 2009 I broke the record for the most ascents of the Grouse Grind for charity. The Royal LePage Shelter Foundation is an incredible organization which is there to help women and children suffering from domestic abuse. Of every dollar donated, 100% goes directly to those in need (Royal LePage covers all administrative costs of the charity).

Donate to the Royal LePage Shelter Foundation

More Info on Vancouver Real Estate

If you’d like to learn more about the Vancouver real estate market generally you can check out this page.

Are you thinking of buying or selling, or just have questions then you can contact me here or send me a quick email.

Copyright © 2009 Vancouver Real Estate in the Vancouver Real Estate Blog by Sebastian Albrecht, Vancouver Realtor with Royal LePage Vancouver ”HST Will Result in Higher Vancouver Real Estate Costs”

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The following is commentary from the BCREA (BC Real Estate Association) on the impact of the HST (Harmonized Sales Tax) on the BC real estate. It is reproduced here with permission of the BCREA.
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Harmonized Sales Tax

On July 23, 2009, Premier Gordon Campbell and Finance Minister Colin Hansen announced that, effective July 1, 2010, BC will adopt a Harmonized Sales Tax (HST), combining the seven per cent Provincial Sales Tax (PST) with the five per cent federal Goods and Services Tax (GST) for a single sales tax rate of 12 per cent.An additional seven per cent tax will be charged on a variety of real estate related services, including commissions, appraisals and other services that are currently exempt, as well as adding thousands of dollars in additional costs to new home purchases.

Looking to offset the increase in costs, the Government of BC plans to offer a partial rebate of the provincial portion of the HST for new housing to ensure that new homes up to $400,000 will bear no more tax than under the current PST system, while homes above $400,000 will receive a flat rebate of about $20,000.

What does this mean for REALTORS®?

As proposed, the HST will increase the cost of buying or selling a home and becomes essentially an additional tax on home ownership. Under the HST, REALTOR® commissions will be subject to a 12 per cent tax, replacing the five per cent GST now charged.

New home sales over $400,000 will be dramatically impacted, as buyers will now have to pay an additional seven per cent tax (even with the $20,000 flat rebate). This will act as a disincentive to buyers of new homes in the short term.

Next steps

Although no consultation occurred before the announcement, BCREA is working on recommendations to keep the impact of the HST as neutral as possible with respect to housing attainability.

Please Donate

On June 22nd, 2009 I broke the record for the most ascents of the Grouse Grind for charity. The Royal LePage Shelter Foundation is an incredible organization which is there to help women and children suffering from domestic abuse. Of every dollar donated, 100% goes directly to those in need (Royal LePage covers all administrative costs of the charity).

Donate to the Royal LePage Shelter Foundation

More Info on Vancouver Real Estate

If you’d like to learn more about the Vancouver real estate market generally you can check out this page.

Are you thinking of buying or selling, or just have questions then you can contact me here or send me a quick email.

Copyright © 2009 Vancouver Real Estate in the Vancouver Real Estate Blog by Sebastian Albrecht, Vancouver Realtor with Royal LePage Vancouver ”Vancouver Real Estate and the HST (Harmonized Sales Tax)”

No related posts.