HST Tax Affect On Home Sellers In British Columbia
When purchasing any goods and services, the small taxation that is added to purchases at an escalating amount is something that we are all used to. In Canada, specifically British Columbia, citizens are accustomed to the provincial sales tax (PST) set at 7% and the goods and services tax (GST), set at 5%. These taxes are going to be combined starting July of this year to create a 12% tax added to a number of goods and services that were previously exempt from either the GST or PST. This HST tax has the potential to adversely effect both home buyers and sellers through the British Columbian province.
The new HST tax and how it affects home sellers will be far reaching. Touted as an economic stimulus that will help many areas of life, the effect on the housing market may not be as stimulating. Originally capped at $400,000, there has been a move to increase the housing cap to $525,000 to appease the large almost unanimous outcry. This is still not good enough when you take into account that British Columbia is home to one of the most expensive housing markets in the North American West.
For homes priced under $525,000 there will supposedly be a rebate that will refund 5% of the housing cost to offset the costs to both sellers and buyers. This rebate is only a small buffer for an increased tax across the board.
For a home priced at $600,000, the total tax of the HST would equal $72,000 – a substantial number. If a consumer were to be able to receive a rebate on a home of this price and it is not clear that would be the case, the adjusted taxes would equal $52,000. As of now the only tax on homes would be the GST, which would only equal $30,000. The HST inflates taxes by $22,000 and that doesn’t take into account all of the other areas that the HST would be worming its way into. Sellers will be hard pressed to find buyers.
The effect of the HST also goes beyond closing costs and will be added to any fees associated with property purchases including any legal fees and, of course, real estate commissions. Homes will now cost more up front than the asking price when factoring the HST, as well the overall experience of living in that home.
This blanket-wide price increase will also be applied to the aspects of living in a home past the sell date. These services include internet and phone, cable and heating, as well as gas and electricity. Having to factor in the increased cost of living with the cost of buying a home will give buyers cold feet and put home sellers at a distinct disadvantage, having to maybe think about lowering prices.
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.
The symptom of a good economy lies in its housing market. If the HST scares home buyers enough the market will stagnate and home sellers will be dealing with a lot of unclaimed property. The blanket price increase that the HST will usher in will impact how consumers approach any purchase, be it a car or a hair cut. Scared consumers don’t spend and that trickles to all corners of a community’s economy. In my opinion, home sellers will be adversely effected by the HST tax in British Columbia.
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.