What does the end of HST mean for Housing Prices in BC?

In general the majority of housing prices will remain unaffected by the end of the HST on April 1, 2013

On April 1, 2013 British Columbia will return to the GST + PST model of consumer taxation that existed prior to the introduction of the HST in 2010. This has no impact on resale housing prices which do not attract HST or GST, but how does it impact new housing prices? In order to ensure that market distortions do not occur, government established transition measures to essentially nullify any impact of this change in taxation on new home prices.  These housing transition rules introduced last year help ensure when people buy a newly constructed home under the PST or HST models, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will generally all pay a consistent and equitable amount of tax. The transition rules provide certainty for new-home construction and sales, particularly during the transition period. Simply put, for the majority of new home purchases the change back to GST / PST will have zero impact on pricing.   So what does this mean for new home buyers before and after this date?

Currently and until March 31, 2013, new home purchases include a net HST tax of 7% as long as the house is under $850,000 and the purchaser qualifies for the BC New Housing rebate. The 7% net HST tax is derived from the HST of 12% minus the BC New Housing rebate on homes up to $850,000 of 5% = 7%. New Home prices such as ours are generally advertised as “net HST included” because it recognizes the reduction in the BC portion of the HST by this homeowner rebate.

As of April 1st, 2013, new home purchases will include GST of 5% and a 2% transitional tax equalling a total of 7% – the same amount of tax as mentioned in the above paragraph.  The transitional tax of 2% added to the 5% GST is in place for 2 years. This ensures equitable treatment among purchasers during the transition between HST and PST and will help mitigate distortive market behaviour. Again new home prices like ours will continue to be advertised as “net taxes included” which means the price will include the GST and the transitional tax.  Our advertised home prices will not change as a result of the change in tax systems.

While PST will not apply to the purchase of new homes, what happens is that builders will once again pay seven per cent PST on their building materials which increases construction costs. On average, about two per cent of the home’s purchase price will again be embedded PST costs and this will continue to be reflected in housing costs after the transition period ends March 31, 2015.

So the conclusion is that the return to the GST / PST model on April 1 will not be reflected in a change in the net price of new homes.  The transition measures introduced by government are designed with the intent that neither consumers or builders are worse off  in the short term by the tax change.  This is not to say that new home prices in BC will not change, there are many other factors that influence housing prices in BC, only that the tax change shouldn’t affect this change.

Bare Land and 0ther Real Estate costs

With respect to bare land prices, the elimination of the HST will mean that land or a serviced lot purchased by a consumer will only attract 5% GST. This will be good news for individuals wishing to buy a recreational lot or serviced home site to build on or vacation at.

Other real estate transaction costs such as real estate commission fees and other closing costs will also see a reduction with the elimination of HST and return to GST only.

A full explanation of the tax changes are available at the BC Government PST site here or the BC Real Estate Association site here.


About Totangi Properties Ltd. and Woodland Creek

Totangi Properties is a locally-owned and operated award winning property development and land management company established in 1968. Brothers Warren and Blair Robertson and their team work closely with the 2012 Built Green Builder of the Year, SC Smith Building Company, in the creation of Woodland Creek and are committed to creating affordable, high-quality residential properties with lasting homeowner value.

2012 Gold CARE Award winner for Best New Subdivision, Woodland Creek is a residential neighbourhood of new homes in the heart of Sooke, British Columbia – a waterfront community near Victoria BC.  A planned residential community, Woodland Creek was designed with the objective of providing a wide range of new housing opportunities for the community; close to schools, parks and the Sooke shopping and service core with the fundamental commitments of quality construction, lasting value and the long term commitment of an established local developer.

For more information, visit www.totangi.ca .



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