HST & Real Estate
Sunday July 25th, 2010
Posted at 11:54am
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Paying taxes is part of life. As we get older we get used to dealing with it. No one likes it. We’d all like to avoid paying taxes. HST (Harmonized Sales Tax) is something we are not used to. It is new, it is definitely not exciting and it is something that the masses across Ontario already don’t like one bit. I’m here to shed just a little bit of light on it and how it will relate to the real estate market.
What is HST?*
Harmonized Sales Tax (HST) is simply the harmonized value-added tax that has now replaced the federal Goods and Services Tax (GST) and Provincial Sales Tax (PST) in Ontario. GST (5%) and PST (8%) have been combined to create HST at the rate of 13%.
No point in rambling on about the advantages, disadvantages, and claims about HST. It’s not going to change the minds of the Ontario Government and make them stop charging it. So on we go…
The main issue of concern for many is how HST is going to come into play in the real estate market. Without a doubt, real estate transactions are going to be a little bit pricier (transaction closing costs). Services from REALTORS®, new home sales, and commercial real estate transactions are going to be subject to HST. Of course, to somewhat lighten the blow, rebates (new home purchases) are being offered under certain circumstances. In other words these homes will need to qualify for the rebate in order to take advantage of it. (http://www.cra-arc.gc.ca/E/pub/gp/rc4028/README.html).
At this point it’s safe to say that anyone involved in a real estate transaction will not enjoy the added costs being included into a deal now that HST plays an added factor. People have to get used to the fact that they will now have to pay more taxes in a transaction. Just a few months ago this wouldn’t have been a factor. How quickly consumers are going to miss those days.
Crying won’t save you now. All we can do it accept it and move on.
Although things were never planned to go like this, it is highly ironic that HST comes into play here in Ontario just as the real estate market in the province has shown great signs of recovery and progress. There is a good chance that these signs of life we’ve seen in the market could be hampered by the HST for a little while. It’s only natural that some consumers who are fence to list their home on the market will want to wait a little longer and see how the market reacts if their hands aren’t being forced. Just remember this is hardly a minor change to consumers. To many this can be a big deal.
No one is certain on how the market will react in the next couple of months now that HST has come into play. The market has responded well since the country has moved out of the recession stage. As REALTORS® we’ll move on and continue to do our daily job, but there’s no doubt that some interesting discussions with clients are ahead now that people are going to be paying more taxes for transactions. We’ll just have to wait and see, but sooner or later consumers will adapt and accept what has been dealt to them.
On the bright side, be thankful that those of us living here in Windsor don’t have to deal with Toronto real estate prices. That is, if anything, a brief sigh of relief.
*Information for this article was acquired from the Canadian Real Estate Association (CREA)