How It Affects You - What the HST means for home buyers

BCREA Recommendations The Association's primary HST recommendation is that, in recognition of extreme differences in home prices across the province, the provincial government implement regional rebate thresholds for new housing, with the following considerations: Rebates for portions up to the thresholds calculated at 71.43 per cent of the provincial portion of HST paid, Rebates for portions above the thresholds calculated at 57.14 per cent of the provincial portion of HST paid, Initial thresholds determined in consultation with BCREA, and Thresholds indexed annually using the New Housing Price Index. The following measures, required as a result of the implementation of the HST, will benefit British Columbians and assist the government in obtaining positive support for its HST goals from BCREA and other real estate groups. BCREA recommends the provincial government: Reinstate a rebate or tax credit for the HST on condominiums that leak due to building envelope failure. Work with the federal government to provide input tax credits for landlords. Extend the HST rebate or tax credit on all energy-efficient products that are currently exempt from provincial sales tax. To restore fairness for homebuyers who already bear a heavy tax burden, BCREA recommends the provincial government implement a three-year phase-out of the Property Transfer Tax (PTT) as follows: Starting on July 1, 2010, increase the 1% tax threshold to $500,000, Starting on July 1, 2011, no PTT on homes under $500,000, and Starting on July 1, 2012, remove the PTT.

The provincial government's decision to harmonize the provincial and federal sales taxes into the new 12% HST will remove $2 billion in costs to BC businesses and provide point-of-sale rebates on many important goods and services.

However, we are concerned that the proposed HST will increase the cost of buying and selling all property and have a significant impact on the purchase of newly-built homes.

Increasing Cost of Professional Services like REALTOR® Commissions
Under the previous system, only 5% GST was charged on professional services associated with real estate transactions such as appraisals, inspections and REALTOR® commissions.

Under the proposed HST, the taxes charged on those services will jump an additional 7%, adding to nearly all closing costs.

Increasing Cost of New Homes
For new homes, under the previous system, only 5% GST was charged on new home sales. Under the proposed HST, a very complicated new arrangement will drive up the cost of new homes.

Partial Rebate Not Enough
To offset the increase in costs, the BC Government plans to offer a partial rebate of the HST for new housing, intending that new homes up to $525,000 should bear no more tax than under the current PST system. Homes above $525,000 will receive a flat rebate of $26,250. New home sales over $525,000 will be impacted, as buyers will have to pay an additional 7% tax less the $26,250 flat rebate.

British Columbians Already Taxed Unfairly on Housing
In addition, the Property Transfer Tax already requires BC homebuyers to shoulder an unfair tax burden. British Columbians pay 222% more in land transfer taxes per transaction than the average Canadian.

The BC Government levies a Property Transfer Tax rate that is 129% higher than the average for Canadian provinces. Higher property prices are not solely to blame for this scenario; prices in British Columbia are 45% higher, so the inequitable structure of the BC Government's Property Transfer Tax adds an additional burden of up to 177%.