HST and how it affects Real Estate

The B.C. Harmonized Tax – BC HST Will Raise New Home Price

Please comment on this blog post regarding your opinion and thoughts on how the new BC HST will influence the British Columbia and Greater Vancouver real estate home prices next year. Announced in August 2009, the BC HST will come into effect July 1st, 2010. The BC Harmonized Tax is simply the combination of the two current sales taxes: the 7% provincial BC sales tax and the 5% federal goods and services tax. The BC HST is 12% (twelve per cent) and will be added to the purchase price of new BC homes and Greater Vancouver real estate. In addition to applying 12% on new home prices, the BC HST will also be applicable to real estate closing costs and fees, which will in turn increase the price of any new home in British Columbia and throughout the Greater Vancouver property market. Currently, new homes in BC and Greater Vancouver are only subject to the 5% GST federal tax (and not the 7% provincial sales tax) Some analysts say that as the BC real estate markets start their long recovery from the global economic crisis and housing bubble of 2008-2009, the introduction of the BC HST 12% tax on new homes in Vancouver and the province of BC will halt first time homebuyers from making the largest purchases of the life.

In addition, the 12% HST will also affect Greater Vancouver housing affordability, which is already the highest of any city in Canada. Overall, BC housing affordability is also the highest in Canada, which means that British Columbians and Vancouverites spend the most after tax dollars on their homes and real estate purchases. The introduction of the BC HST on new Vancouver homes for July 1st, 2010 will likely damper the sales volume of new real estate in the city in addition to making property more unaffordable for first time homebuyers while making it that much more expensive for current homeowners looking to upsize into larger new Vancouver homes. The other thing to keep in mind is that many retirees are getting to retirement age, and the addition of the 12% BC HST will likely influence what these empty nesters can afford to purchase if they are looking for a new home in BC or Greater Vancouver real estate markets.
Overall, the combination of the PST and GST into the British Columbia HST new Harmonized Sales Tax will ultimately affect the majority of the BC population looking to purchase new homes and real estate property, including those Vancouver condo home buyers. On average, a consumer looking for new BC property will end up spending 7% more because of the difference between the 12% HST harmonized sales tax versus the current 5% GST goods and services tax that are applied to new property.

British Columbia already has the award for the most expensive real estate in Canada. The Okanagan region, Victoria and Greater Vancouver also all fit within the top ten most priciest property markets in the country.
The integration of the new provincial BC HST of 12% on new real estate will further increase and bump up the price for new homes in the province, thereby decreasing affordability throughout the region.

Some BC Real Estate HST Numbers and How It Affects You

Scenario 1: Based on a purchase price of $600,000 for a new BC or Vancouver home, the homebuyer would pay a total of $72,000 in BC HST taxes (12% on $600,000). With the homebuyer HST rebate for purchases above $600,000, the homebuyer would receive the $20,000, thus reducing their purchase cost to $52,000 in taxes for a total of $652,000. Currently, the 5% GST applicable to the same home would cost only $30,000 (a difference of $22,000). *This does not include the HST applicable to closing fees.

Scenario 2: If a BC homebuyer wanted to purchase a new Vancouver home costing $800,000, the total 12% HST hit would be $96,000. The partial HST rebate of $20,000 (maximum allowed) will reduce this to $76,000, making the final purchase price at $876,000 plus property transfer taxes and other closing costs. Before July 1, 2010, a new home would be subject to only 5% GST which is $40,000 on a $800,000 property. With the new BC harmonized sales tax, a BC homebuyer would pay $36,000 more for the same home after implementation of the HST tax. *This also does not include the HST applicable to closing costs.

For more information please see: Vancouver Real Estate Page