invoice factoringThe new harmonized sales tax (HST) taking effect within British Columbia in July of this year will severely tax an already high-priced real estate market. The tax itself is a combination of provincial sales tax (PST), set at 7% and the federal goods and services tax (GST), which is set at 5%. This creates an extremely high 12% tax that will be added to goods and services that were previously exempt from the PST, including restaurant tabs, haircuts, and clothing as well as the larger priced ventures like real estate.
The new HST tax and how it affects home sellers will be opposite of its marketing as a smart economic solution with wide ranging impact. There, supposedly, will be no real impact for buyers of homes under $400,000. This number was recently increased to $525,000 due to the large and deafening outcry from the real estate market which is more attune to what can effect it. The outcry was in response to the knowledge that real estate prices in British Columbia are among the highest in the North American West. This province is full of bustling and cosmopolitan cities like Vancouver and, as such, the median home prices are well above $400,000 – in Vernon we are already over $350,000!
The idea that those buying homes for under $525,000 will not be effected by the HST is due to a rebate program that will be implemented for homes bought after July 1st of 2010. While this will decrease some of the cost, the HST will still be a detriment to home sellers looking for buyers.
While the cap of $400,000 keeps sellers and buyers in more or less the same relationship as before without the HST, the same is not true for homes above that set price point. For a $600,000 home, for instance, the total HST added to the purchase price is $72,000. With the rebate program in effect for higher priced homes, the taxes would be readjusted to $52,000. The current GST would be only $30,000 for a home at this price and so the HST creates a deficit of $22,000. These numbers do not take into account any additional services that would also have HST.
The HST is applied to practically everything involved in the purchase of home including real estate commissions and legal fees. The asking prices of a home will no longer be indicative of the increased costs associated with the implementation of the HST.
Because HST is applied to a wide variety of goods and services it will be impacting internet, gas, electricity, heating fuel, and any repairs that are made. The HST creates a large jump in living expenses that makes the purchasing of a new home, or even selling an existing home very difficult.
The promise of an increased and more efficient economy with the addition of the HST is naive. Rebates aren’t enough to offset the lifestyle cost increases that may end up hurting the real estate market hugely.
Stagnant housing markets adversely effect the overall economy of any area, as the health of this market is an indicator of good economic times. The new HST tax and how it affects home sellers and buyers will be that real estate will become more of an ordeal that ever before, as well as ingratiating itself into other areas of life and services from haircuts to funeral services. 12% additive tax on a small number of items and services may not make a huge impact, but having 12% added to practically everything will have the opposite effect that is intended.
Get more information today on the many factors affecting home sellers and buyers at the Salt Team Blog today! Lisa Salt at RE/MAX Vernon can answer all your questions regarding Vernon Real Estate.
Recent Comments