HST and you!

As I’m sure you’ve heard by now, come July 2010 the GST and PST will be replaced by the infamous Liberal HST. What do you need to know about how this will affect the real estate world?

For SELLERS the biggest way the HST will affect them will be in real estate commissions. Presently the real estate commissions you pay as the seller of a property have GST added on top of that percentage. Come July, the entire HST will be applied.

So, as an example: on a $300,000 home, using a 6% commission with a closing date prior to July you would pay a total of $18,000 plus GST = $18,000+900= $18900
With a closing date on or after July 1st 2010, the commission would be $18,000 plus HST = $18,000 +2340 = 20340.
An increase of $1440.

Obviously this will be a significant increase owners should be aware of when planning a budget for selling a home.

For BUYERS the biggest way the HST will affect them will be in purchasing a new home. Presently the GST is not applied to resale homes, but does apply to new homes. Most builders include the GST in their purchase price, but this is certainly something that should always be clarified so there are no surprises. Come July 2010, the HST will be applicable to the purchase of new homes, and you can bet this increase will be passed along to the buyer.

So, as an example: Presently on a $300,000 new home, the builder might add on the 5% GST of $15,000 making the price to the buyer $315,000. Come July 2010, if the buyer includes the HST in their price to the buyer, the buyer will be paying a whopping $339,000.
An increase of $24,000!!!
Thankfully the provincial government has recognized the blow this would have for the new home industry. So, homebuyers will be able to claim a rebate of some of the provincial portion of the tax for new homes priced up to $500,000. The rebate for new primary residences under $400,000 will be six percent of the purchase price (or 75 percent of the provincial portion of the tax), with the rebate amount reduced for homes priced between $400,000 and $500,000.
Will still result in an increase but not as much of a blow.

Buyers of new residential rental properties will receive a similar rebate.


Not considering buying or selling, but you are a home owner? How will this affect you?
In reality, the HST will mean that the costs of all services will increase. Hiring a plumber, a roofer, a carpenter will all cost more money. Heat and hydro costs will no longer be exempt and you'll pay the full 13%.
Rental fees and condo fees are exempt, but you can bet that the increase in costs of heat and hyrdo and property managament fees will be passed along to the renters and condo owners eventually.

Certainly if you have any questions as to how the HST will effect you, I'm no tax expert, but pop me an email and I'll find an answer for you!