27. October 2009 16:01
The impending HST which takes effect on July 1st 2010 will be hazardous to all professions, but none bigger than a real estate transaction. With all the rules and laws of the bill still to be finalized - what do we know so far? HST will be a new harmonized tax of 13% charged on all goods and services.
New home builders will be affected the worst. Any new build over 400k will be subject to this new HST. New homes between 400k and 500k will be subject to HST but at a reduced rate. New homes over 500k will be subject to the full 13% HST. This will definitely slow down the housing starts as builders will be left with unsold inventory because consumers will turn to the resale market to avoid that HST from new home builders. In turn, new home builders will stop building homes over 500k or just not build as many, forcing wealthier patrons to build smaller homes for their family.
So how does this affect the resale market? Well, consumers will get a break from the HST if they buy resale; however they will still be subject to HST on real estate commissions, lawyer’s fees, property inspections etc. The entire real estate process will be more expensive for the consumer. With new home builder starts set to decline in the second half of 2010, the real estate sales volume should also slow down. The dollar should still remain high and therefore affect our trade with the United States and other countries.
The one silver lining with all these tough economic indicators is that interest rates will remain at all time lows. First time home buyers and anyone still looking to buy will have the benefits of really low borrowing costs. It might be the silver lining, but all in all, this McGuinty government needs to be accountable for this mess they are about to bestow on the citizens of Ontario. Nothing good can come of a tax that will turn back the clock and keep us in tough economic times for the next few years.
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