HST in BC - Affects of New Tax on Real Estate in the Comox Valley

Posted: May 26, 2010

Source: John Hudey RBC Royal Bank and Anna Jorgensen Coast Realty Group Ltd.

HST in British Columbia
 
On July 1st 2010 the Provincial Sales Tax in BC is being replaced and harmonized with the GST to create a single 12% tax. The new HST will have impact to those people who are building or purchasing a newly constructed homes or substantially renovated homes,  but will not impact those who are purchasing resale homes.
 
Purchasers of newly built homes will be eligible to apply for additional rebates up to a maximum of $26,250 as a result of the HST. If new home construction spans the July 1, 2010 HST implementation date, further rebates may be available.  The aforementioned rebates will largely offset the additional tax that is payable on homes costing less than $525,000.  However, the costs will be greater for those who have contracted to build or are purchasing a newly constructed home with a value greater than $525,000.
 
Many homebuilders have included the costs of HST and the associated rebates under the plan directly into the purchase price. In these cases, the rebates normally available to a homebuyer are assigned to the developer.  Information about whether the HST and rebates are included in the purchase price is included in the agreement of purchase and sale.
 
If the developer has not included the HST and associated rebates into the price of the home being built, homebuyers must apply to the federal government for the rebates and wait for the forms to be reviewed and approved.  As a result, these amounts must be financed by homebuyers during the intervening period.
 
Certain costs associated with buying and selling of homes will also be impacted.  Such items as legal fees and real estate commissions will now be subject to HST.
 
For further information about how the new harmonized sales tax may affect new home purchases can be found at this BC Government website link.  Included on the website is a new home purchase HST calculator
 
http://hst.blog.gov.bc.ca/faqs/new-housing-rebate/
 
Of course the best way to understand the impacts of the HST on homebuying plans is to contact a knowledgeable real estate lawyer who will be able to provide advice relevant to specific situations.

ANNA'S "In a nutshell" INPUT:

HST will have very little impact on real estate values in the Comox Valley as it mostly affects houses over the $525,000 price point which is far above the average price of $350,000 (give or take) and even at a price of $1,000,000 (thus far NO sales in the Comox Valley over $1,000,000 YTD) it is less than $20,000 difference. Now $20,000 is $20,0000 but if you are buying a brand new house in that price range, well, my theory is you  can afford it. It's still a kicker, no doubt, but it's not going to stop you from moving forward on that dream home you've been waiting for and deserve.

It may take out some seasonal/recreational buyers as the rebate doesn't apply in those cases and 1/4 share units - tough sell to begin with - HST will make those even tougher to sell. Sorry.

There are many factors  that will influence values in the Comox Valley but HST can be considered a minor blip overall. I'll write more about the 'other factors' in a separate blog.

Most of the clients I work with are moving for lifestyle reasons but for those of you who are holding real estate as an investment I highly recommend having an experienced financial planner look at your whole portfolio. I love real estate (Of course!) but I also believe that diversity is key to long term financial success. If you have any questions about your personal real estate investments or plans please feel free to contact me anytime! anna@annajorgensen.com

Have an inspiring day!