Monday July 5th, 2010 - Economist Predicts HST’s Impact Short Lived

Michael Gregory, economist for BMO, is confident that any impact the soon-to-be-implemented HST has on the housing market will fade soon enough.

Gregory said that the Canadian economy is strong and both job creation and the economy are on the rise, factors that have a bigger impact on the real estate market than HST.

HST is set to come into effect in Ontario and B.C. on July 1 and has heated the real estate markets in both provinces, especially Toronto and Vancouver, as buyers rushed to beat the HST. Gregory believes the tax implementation will initially lower real estate sales but that sales will slowly increase as buyers return with stronger savings.

The tax will affect prices for new homes and homes over $525,000 but not pre-existing homes below that price. It will also increase professional services involved in selling real estate, including realtor commission and legal fees.

Kamloops and District Real Estate Association President Dick Pemberton doesn’t think the rise in professional fees will necessarily affect affordability. Instead, Pemberton believes buyers will negotiate more for services as the HST comes into play.

Pemberton said the HST tax is nothing when compared to property transfer tax of B.C., implemented in 1988. Currently, transfer tax remains at the same rate as it did in 1988 but impacts over 88 per cent of housing sales in B.C. due to an increase in property values.

And, like Gregory, Pemberton agrees that while the HST may initially impact sales, it will only be a matter of time before buyers jump back into the market after the HST shock has faded.