Blog by Evon Mayer

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HST for Dummies!

HST rebate explanation for home buyers
The concept of HST scares many people and I am asked about this all the time. That being said I put together a simplified version of how this will affect you. HST (Harmonized Sales Tax) is a new tax being introduced next year (2010) that will greatly affect real estate. Previously we were charged 5% GST on new construction, plus property transfer tax (if applicable), starting July 1st,2010 we must pay 12% (5% GST & 7% PST), plus property transfer tax (if applicable). Find this disturbing? I certainly do. Not a big surprise, the public doesn’t agree with HST on real estate and all of the sudden a rebate system pops up. Was this planned the entire time? Maybe, maybe not. Purchasers of new homes will be eligible for a rebate of up to 71.43%. Where this magical number came from is beyond me. That’s right folks, at best the government will be keeping another 28.57% of the previously provincial 7% tax. The new (as of November 18, 2009) HST threshold is now $525,000. When you exceed this number and purchase a mediocre downtown condo, the government feels you can afford more and maxes out your rebate at $26,250. What does this mean to you?

Let’s do some math:

$500,000 Purchase price
+$60,000              HST
+$8,000                Property transfer tax
-$20,000               HST rebate
+$2,000                Closing costs (lawyer, etc)
=$550,000            Final cost

You are essentially paying $50,000 over the value of the home. Now don’t get me wrong, a good realtor will add that in the purchase contract but that only masks the tax. Thinking twice about purchasing new real estate now? I am. The old system would have cost you $15,000 less in this equation. If you purchase (close on your transaction) before July 1, 2010 you will not be affected by HST. Sales of new properties under written agreements before November 18, 2009 will generally not be affected by HST. This does not apply to the re-sale homes, however costs associated with the purchase will be also affected. Cost to sell is also affected because realtors must soon charge HST on commissions!

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