Rob Ferguson – Yourhome.ca
When it comes to the 13% harmonized sales tax kicking in July 1, lots of home buyers and sellers appear to be in for a big surprise, says the Canadian Real Estate Association.
“I run into people who still don’t know its coming,” says association president Pauline Aunger. “There are people who don’t listen to the news or read the newspaper.”
The controversial tax doesn’t apply to resale homes, but it does hit new ones — with a 75% rebate on the first $400,000 of the price tag — as well as real estate commissions, legal fees, home appraisals and moving costs.
Aunger urges people buying or selling homes and condos to close their deals before Canada Day if possible, noting the average buyer of a re-sale home could save about $1,500 by beating the controversial new tax.
The HST is a marriage of the broadly based 5% federal Goods and Services Tax — already charged on the above items and most goods and services — and the 8% provincial sales tax in Ontario, which does not now apply to real estate commissions, new homes and the like.
That means an extra 8% in taxes, although the government notes it cut income taxes Jan. 1 to help offset the HST hit.
For example: the real estate association calculates the additional tax at $80 on typical legal costs, $1,209 on sales commissions, $32 on home inspections, $80 on moving and $24 on home appraisals.
“If you’re buying, go out and buy now,” advises Aunger.
The jury is still out on whether the fast pace of home sales and rising prices is due to the looming HST, because experts say low interest rates are also playing a role.
It’s generally too late to avoid the HST on purchases of new homes because the government has ruled that deals to buy houses after June 18 are subject to the tax, says president Stephen Dupuis of the Building Industry and Land Development Association.
“Since last June, most of what you buy is for closing after this July 1, because most new homes are pre-sold and then it takes time to build them,” he explains. “Whether people know they’re still paying the HST or not, they’re still buying like crazy. We honestly don’t expect a blip after July 1.”
On a new home costing $500,000, the extra provincial portion of the HST totals $40,000. The 75% tax break for the first $400,000 is gradually phased out as the price rises above $500,000.
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Contact the Jeffrey Team for more information - 416-388-1960
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