| | The HST and its effect on Houseing prices.
Although the BC government and Ministry of Finance indicates that there is currently the 5% GST applicable to new construction homes and BC real estate for sale in addition to 2% PST that is embedded within the cost of new homes on construction nmaterials (as Vancouver and BC home builders can get the full PST rebate currently), the 12% HST or BC Harmonized Sales Tax is applicable to any new housing. The BC government has stated that there will be a partial HST rebate available to homebuyers that is equal to 5% of the purchase price up to a maximum BC HST rebate amount of $20,000 (twenty thousand dollars). As the Ministry of Finance indicates the ‘hidden’ 2% PST tax on construction materials for new homes built in BC right now, they argument is that with the 5% HST rebate on new homes in Vancouver/BC, homebuyers purchasing new property under $400,000 will be paying the same amount before and after July 1, 2010. Essentially, the current 5% GST + 2% PST embedded into current Vancouver new homes is equal to the 12% HST – 5% HST rebate on homes less than $400k purchased after July 1st. However, BC homebuyers looking to purchase new Vancouver property over $400,000 will not be so lucky, as they will be taxed at a rate that is 7% higher than the current GST/PST system because of the flat $20,000 HST rebate allowable by the government. The B.C. Ministry of Finance has indicated that about half of new BC and Vancouver home construction is sold for more than $400,000. Therefore, half of new Vancouver homebuyers will not see a difference in their final purchase cost after the 5% HST rebate is applied, while the other half of new home buyers will see a significant 7% increase in their purchase price even with the $20,000 BC HST harmonized sales tax rebate. There is currently no form or indication of how the BC harmonized sales tax rebate or HST rebate can be claimed at this time, but further information will be released next year.
|
Price of Eligible
New Home
(not including GST/HST) |
GST Portion – New Housing Rebate1 |
BC Portion – New Housing Rebate2 |
Total Rebates |
Purchase Price
(not including property transfer tax & other closing fees) |
New Home Cost Increase |
|
$350,000 |
$6,300 |
$17,500 |
$23,800 |
$368,200 |
$0 |
|
$400,000 |
$3,150 |
$20,000 |
$23,150 |
$424,850 |
$0 |
|
$600,000 |
$0 |
$20,000 |
$20,000 |
$652,000 |
$22,000 |
|
$800,000 |
$0 |
$20,000 |
$20,000 |
$876,000 |
$36,000 |
|
$1,000,000 |
$0 |
$20,000 |
$20,000 |
$1,100,000 |
$50,000 |
1 New British Columbia and Vancouver home buyers may be eligible for the federal GST Rebate (called the GST new housing rebate), which generally equals 36% of the total GST tax paid on the first $350,000 of the purchase price of a new home. The amount of the federal GST rebate is phased out on a straight-line basis for new BC and Vancouver homes priced between $350,000 and less than $450,000.
2 British Columbia proposed Harmonized Sales Tax rebate (or BC HST rebate) for new housing is equal to 5% of the purchase price up to a maximum rebate of $20,000.
Crunching the HST Numbers
As you can see, even with the partial HST rebate for the new BC harmonized sales tax on new Vancouver property, a homebuyer purchasing a home over $400,000 will lose out when it comes to this new tax system. During the current system, a homebuyer purchasing a new British Columbia home or Vancouver real estate would only have to pay five per cent federal GST (plus what the BC government says, the hidden 2% PST … which is paid for by the builder/developer who gets a refund after the home is built … but passes on the cost to the home buyer). In the new system which wil come into affect on July 1, 2010, Vancouver home buyers of new property will need to pay upwards of $50,000 more on a $1,000,000 house. For those looking for family sized condos or townhomes around the $600,000 range, you will need to budget at least $22,000 more in terms purchase price plus an increase in closing costs due to the new British Columbia harmonized sales tax system. For those looking for condos under $400,000, your end result is neither a gain or loss in terms of purchase price, as the BC government has put in full BC HST rebates for these home purchasers. But how fair or realistic is this new HST rebate for British Columbians? According to analysts, not really! First of all, it is hard to find any home, even condos in the downtown Vancouver core that will sell for less than $400,000, meaning that majority of Vancouver homebuyers will not get the full HST rebate. As you get up in price, the maximum cap on the partial BC harmonized sales tax is only twenty thousand dollars, which repreasents very little savings when you approach $600,000. In addition, there are also talks amongst the major banks that they will NOT finance the new BC HST. Currently, most major banks will finance the GST applied to new homes in BC and in Greater Vancouver. What this means is that a homebuyer will need to pay the extra HST tax upon closing, and this is very unrealistic for most first time homebuyers and home purchasers in general. With the partial BC HST rebate capped at $20,000, it doesn’t give new Vancouver home buyers much of a break from the already super heated property market in the city.
Essentially, the new BC harmonized tax system actually penalizes those homebuyers who have saved vigorously to purchase a new home in British Columbia and who can afford something more substantial and bigger for their families.
[Vancouver Real-Estate Direct] |
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