The new Harmonization Sales Tax (HST) proposed by the provincial government has the home building and real estate industries deeply troubled. While there continues to be some fine tuning before it comes into effect July 1st, 2010 – the bottom line is that it will cost you more to buy a home once the new tax is in place.
Essentially, the province is marrying the existing Provincial Sales Tax (PST) of 8 percent and the Goods and Services Tax (GST) of 5 percent to create one tax of 13 percent known as the HST or Single Source Tax (SST). Under the HST, home buyers and sellers will have to pay extra tax on a range of services associated with real estate transactions such as mortgage insurance premiums, title insurance, legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5 percent GST on these services.
Subject to the 13 percent HST, these services will then cost you an additional $2,000 or more on a home priced at $360,000 for example.
According to Pauline Aunger, President of the Ontario Real Estate Association, these additional taxes could price some home buyers, especially first-time buyers, right out of the market. “Now is not the time to be erecting barriers to homeownership,” she argues “We need consumers to invest in housing to help get our economy going again.”
And while the association is strongly urging the province not to go through with harmonization, the reality is that the government will not likely back down and we will assuredly see the HST next year.
The question many potential buyers might want to ask themselves is that would it be in their best interests to purchase a home within the next 11 months to avoid the HST? The first consideration concerns price. There seems to be little advantage to waiting. House prices are beginning to move upward as our economy slowly recovers, but are still attractive today. So, if the price is right, wouldn’t you rather take that $2,000 you would pay in extra taxes after next July and invest it in your home? In addition, you would certainly realize greater value with a “today” strategy since current government incentives to make home improvements and upgrade energy efficiencies will stretch your dollar that much farther.
Buying a home is one of the biggest investments you will make, and seeking the best value for your money is always a smart strategy.
Dan Cooper is an award winning Broker with Royal LePage Real Estate Services Ltd., Brokerage. He can be reached at 905.338.3737 or direct line at 905.849.3303. For more information about Dan and his team please see his innovative website DanCooperTV.com, or be sure to catch the Dan Cooper Real Estate Education Series on DailyWebTV.com. For a free copy of his Guide to Oakville Real Estate or his booklet How To Sell Your House For Top Dollar, please call the Dan Cooper office.