Wednesday April 21st, 2010 - Developers Rush to Beat July 1st HST Sales Tax Deadline

On July 1st of this year the new Harmonized Sales Tax (HST) will take effect in British Columbia. This tax is a combination of the Federal Government Sales Tax (GST) and the Provincial Sales Tax (PST) currently in effect. This means that all new homes will be affected by the 12 percent HST tax rate, rather than the 7 percent GST that was the norm. Currently new homes are exempt from PST.

That additional five percent can make quite a difference in the affordability of a home. Using Metro Vancouver as an example, where the average price of a single family detached home is $800,341, the HST would add roughly $40,000 to the cost of that home. The province does have a rebate program on the first $525,000 of a home’s price so buyers would get the five percent back on that portion, but would have to pay the full 12 percent on the remainder.

Developers are pushing ahead with construction projects, some even on spec, in hopes that these properties can find buyers before the deadline. It is expected that as the deadline nears there will be more deals advertised from developers trying to clear out their inventory. This construction push is also creating welcome work for those in the trade.

While the HST, along with the increasing interest and stricter mortgage rules may price some people out of the housing market, the recreational housing sector is not expected to be badly effected by the new tax. These homes are purchased with discretionary income for the most part.

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