HST is Hurting Our Industry
I am not an accountant, nor do I claim to have deep knowledge of the effects of the HST on other industries. I am however a business owner as Realtors are a form of independent contractor. I do feel a pinch from the HST. In my business, we need to charge a hefty fee in order to survive. Not all Realtors work as hard as they should to make it worth it, but that is another post.
The reason I feel a pinch with the HST is because Sellers are making a crossroads of life decision when listing their house. There is so much on the line for them that any small thing can turn them off idea whether things make sense financially or not. It is at this point that they are hit with the costs of doing so and then again with HST. As we’re talking about quite a lot of money, it’s hard enough to convince people to pay for my work and expenses, the work and expenses of the Buyer’s Realtor, and the staff of our respective companies plus the real estate board and so on. When you add a whopping tax to that it is adding insult to injury and is usually enough to make people think twice about listing their place at all. Some are quick to point out that one can apply for an HST credit when filing one’s returns however not all tax preparation software provides for this and the CRA limits eligibility to some taxpayers.
A year or so ago, I was told by an Accountant that the HST would be good for certain industries, like builders/contractors because it would reduce the costs of the materials they use to build. Now I am hearing tales of woe from that industry as you can read below. I also know some restaurant owners who are saying that their income is down because people are holding back on how much they spend due to the HST. I don’t know the financial inner workings of other industries but I am still looking for someone who can give me an unequivocably clear explanation of how the HST is supposed to be helpful. All I have heard are vague affirmations which seem to be based more upon faith than anything. As for my own business, I am unaware of any savings on my end of things, just challenges.
I suggest having a look at the article below. To give you some context, there has been a fall in the number of sales for the time of year in recent months. There has, however, also been a fall in the number of listings. The rate of both declines are almost the same so this is why you are not seeing a meaningful drop in prices. (Although I have seen a slight drop in certain types of properties, especially new construction condos.) The company mentioned below, Inisght, is a major national development company which has recently made the announcement that they are putting a major condo construction project on hold and laying off some local employees due to a lackluster market for new construction condos. In my opinion, it is partly due to a public who doesn’t understand that Buyers don’t have to pay the full HST (if any) on every property let alone for the full price of the property. It is also partly because there were some big projects that were started before the end of the boom a couple of years ago and that inventory hasn’t been completely bought up. And yes, of course, a softer market that is doing much better than the mainstream media will ever let on but is still admittedly not as vibrant as it was only a few years ago.
Anyhow, please read on. The above comments are my attempt to give context and meaning to the article that follows.
Developers say the HST causing construction dip
Fate of controversial tax will be decided through referendum
Developers and construction workers in Nanaimo and across the province hope that new housing sales will pick up once the fate of the Harmonized Sales Tax is decided.
Home construction in Nanaimo is down more than 30% from this time last year, according to data from the Canadian Mortgage and Housing Corporation, and builders maintain a large part of the drop in the demand for new housing is related to uncertainty and confusion over the HST.
Nanaimo’s InSight Developments has recently decided to delay a number of planned housing projects in the city and mid-Island area due to the market slump. InSight president Doug Bromage said many people are afraid to make any decisions regarding buying real estate in Nanaimo until the fate of the tax is finally decided once all the ballots in the referendum are counted, expected in late July.
Byron Gallant, president of the mid-Vancouver Island chapter of the Canadian Homebuilders Association, agreed that a lot of potential home-buyers are “sitting on the fence” and waiting until the referendum is decided before making any major real estate decisions.
But Gallant said the whole issue could and should have been avoided if the government had properly explained the HST before it was put in place last July.
He said the government neglected to explain to buyers of new homes costing up to $525,000 that they are eligible to receive a rebate of 71% of the provincial portion of the HST, up to a maximum of $26,250
Parksville-Qualicum MLA Ron Cantelon acknowledged that the government did a “poor job” of explaining the implications of the HST, including its effects on the real estate market, when it was first introduced.
But Cantelon, who worked as a real estate agent for more than three decades, said the “cyclical nature” of the real estate business, and the economic downturn over the last few years is also playing a part in the industry’s current malaise.
“I was among the many who was angered when the HST was first implemented because I didn’t fully understand it and I thought it would likely hurt the construction industry,” Gallant said.
“But, with the rebate, it causes a trickle-down effect that works itself out for most buyers. It’s unfortunate that all aspects of the HST and what it means to consumers was never properly explained at the time.”
The CMHC reported 142 housing starts in Nanaimo this year, from January to the end of March, down from 215 over the same period last year.
Gallant said many commercial builders in Nanaimo are also “putting the brakes” on moving forward with a number of projects until the HST referendum is decided.