B.C.’s Proposed HST and Real Estate
When I heard about the HST that the provincial government is planning to put into effect next year, I was briefly unconcerned. After all, when I was going to university in Nova Scotia, HST was the norm. Except for the mild annoyance of having to do quick mental math before going to the cash register to make sure you had enough money with you, it didn’t bother me so much as I perceived the products I was buying to be things that would have PST on them anyway.
But then I had a thought about Real Estate. I was worried that thi would mean that new construction would become much more expensive. I thought “Well, the government’s not perfect, but they’re not insane either. They’ll have some sort of exemption in place for such a big ticket item like Real Estate.” But my faith (what little I had) in the people running the show was dashed yesterday when I heard that this HST on new homes nonsense was definitely a go and that their “exemption” is laughable.
You see, new homes (ones that have yet to be occupied) currently have GST on the price. So, if you’re looking at a new home that has a sale price of say $400k, that means that there will be $20k of tax on top of that price in addition to closing costs. Of course, you can typically include the cost ofthe GST in your mortgage, and there are rebate systems in place but it is still enough to turn most people off an intial plan of buying a new home and make them buy a not new home that is under 5 years old instead.
It’s things like this that put pressure on contractors to do more for less cost. As for us Realtors, it means that we have to lower the expectations of some buyer who might have had their eye on that new $400k home which was just at the high end of what they could qualify for in terms of a mortgage.
That’s the situation now with a 5% GST. A bit of a challenge sometimes. Too much for some consumers and no big deal to others. Now it’s announced that there’s this new tax that will make new homes another 7% more expensive. This will also be applied our commissions that we have to try so hard to get in the first place. Now, granted, there is a rebate of up to $20,000, but I still feel that this will be difficult for people in the Victoria and Vancouver areas, and unfairly so. Talk about timing though! The real estate market is just starting to recover from the slow down over the past year. Builders and Realtors alike took a big hit during this time, and now the provincial government wants to make it harder again just as we’re getting on our feet. This is not to forget the consumers, many of which will no longer be able to afford the new home they wanted.
But the government, in Mary Antoinette form, has a “solution”. That being no tax increase for new homes under $400k. You see, in their eyes $400k is a luxury home in B.C. This is a perfect and damning example of how little they know about real estate prices. It would only take them five minutes of research to find out that you can’t even buy a decent new home for under $400k in Vancouver or Victoria if at all. In Nanaimo and neighbouring communites like Ducan, Qualicum, Parksville, Ladysmith, Comox, and Campbell River to name a few, a new home under $400k is available, and fairly nice but certainly not a luxury home to anyone hailing from a first world nation. It’s obviously a number arrived to by averaging the sale prices of homes from across the province. This method completely overlooks the fact that most of B.C. consists of small communities that are far from everywhere else and have real estate prices that are considerably lower than the large (for Canada) communities that surround Vancouver and most of Vancouver Island, and yes Kamloops.
Of course, if you’ve been paying attention to Real Estate news, you’ll know that this has been announced around the same time as they have decided to cancel the interest free loans to people who unknowingly bought leaky condos.
The Liberals aren’t so friendly to homeowners and those who work for them are they?